Asset Liability Management
Change in interest rate, exchange rate and market liquidity may expose the bank to risks and may threaten the survival of the bank as well if not managed effectively. The ALM function comprises management of liquidity, maturity profiles of assets and liabilities, interest rate risks and forex risk. ALM desk officials prepare ALCO paper incorporating local and international economic update, market liquidity forecasts, interest rate projections, balance sheet analysis and recommend measures to be taken to optimize balance sheet whether to reduce or increase deposit and lending rates.
ALM desk guides ALCO in changing lending and deposit rates with proper analytics and better forecasts. A new ALM policy was formulated by ALM desk keeping BASEL III liquidity ratios (LCR & NSFR) in mind and central bank’s ALM guidelines into active consideration. Change in deposit mix reducing dependency on term deposit reduced substantial costs for the bank.