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  2. 2. Asset Liability Management Policy Asset Liability Management (ALM) is an integral part of Bank Management; and so, it is essential to have a structured and systematic process for manage the Balance Sheet. Banks must have a committee comprising of the senior management of the bank to make important decisions related to the Balance Sheet of the Bank. The committee, typically called the Asset Liability Committee (ALCO), should meet atleast once every month to analysis, review and formulate strategy to manage the balance sheet. In every ALCO meeting, the key points of the discussion should be minuted and the action points should be highlighted to better position the bank’s balance sheet. In every ALCO meeting, action points taken in the past ALCO meeting should be reviewed to ensure implementation. Specific functions of ALCO are: 1. To receive and review reports on liquidity risk, market risk and capital management as covered in this report. 2. To identify balance sheet management issues like balance sheet gaps, interest rate gap/profiles etc. that are leading to under-performance. 3. To review deposit-pricing strategy for the local market. 4. Review liquidity contingency plan for the bank.
  3. 3. PART A EXECUTIVE SUMMARY. ....................................................................................................4 PURPOSE/METHODOLOGY/LIMITATIONS/DISCLAIMERS.....................................5 POLICY STATEMENT..........................................................................................................7 ORGANISATIONAL STRUCTURE.....................................................................................8 PROCESS .................................................................................................................................9 1. ALCO AND ALM ................................................................................................................9 2. THE COMMITTEE ..........................................................................................................10 3 KEY AGENDAS ...............................................................................................................10 4 ALCO PAPER ...................................................................................................................10 4.1 COMMENTARY......................................................................................................10 4.2 INTEREST RATE TREND OF THE MARKET .................................................11 4.3 BALANCE SHEET..................................................................................................11 4.4 INDICATORS ..........................................................................................................11 4.5 MATURITY PROFILE...........................................................................................14 4.6 LIQUIDITY TEST...................................................................................................15 4.7 INTEREST RATE PROFILE.................................................................................16 4.8 COMPLIANCE ........................................................................................................16 5. THE ALCO PROCESS ..................................................................................................17 6. ACTION POINTS ...........................................................................................................17 7. IMPLEMENTATION AND REVIEW OF STRATEGIES ........................................17 8. SPECIAL ALCO MEETING.........................................................................................18 9. MARKET RISK ..............................................................................................................18 KEY CONCEPTS ..................................................................................................................19
  4. 4. EXECUTIVE SUMMARY Changes in market liquidity and or interest rates exposes banks/ business to the risk of loss, which may, in extreme cases, threaten the survival of institution. As such, it is important that senior management as well as the Board of Directors must understand the existence of such risk on the balance sheet and they should ensure that the structure of the institutions’ business and the level of balance sheet risk it assumes are effectively managed, that appropriate policies and procedures are established to control and limit these risks, and that resources are available for evaluating and controlling interest rate risk. Increasingly Asset Liability Management has become an integral part of Bank Management. Banks’ are exposed to Balance Sheet Risk, where it is absolutely necessary for the management of the bank to understand the existence of such risk and best manage the exposure to the risk. The Asset Liability Committee (ALCO), comprising of the senior management of a bank, is primarily responsible for Balance Sheet Management or more specifically Balance Sheet Risk Management. The report aims at promoting international best practices in Balance Sheet Management for the banking industry in Bangladesh. The purpose of the report/ guidelines is to provide guidance to management and to train new staffs. This is intended to be the basic framework for further development as the skill sets go up the curve and also, to introduce new policies and processes as we make progress in understanding and implementing the basics. 4 Bangladesh Bank Focus Group
  5. 5. Purpose This report is aimed to provide a detailed guideline on Asset Liability Management (ALM) of the bank for optimum Balance Sheet Risk Management. This guide is prepared by the members of the ‘Focus group on Foreign Exchange Risk & Asset-Liability Management’, which emphasises on developing the market and the banking industry as a whole. The members include: 1) Kh. Khalidur Rahman Deputy General Manager Bangladesh Bank 2) Ezaz Ahmed Senior Principal Officer Sonali Bank 3) Ahmed A Shah Head of Global Markets Standard Chartered Bank 4) Bashar M Tareq Vice President Citibank, N.A. 5) Md. Mohasin Miah Senior Vice President Dhaka Bank Ltd. 6) Syed Imtiaz Hasib Senior Executive Vice President Southeast Bank Ltd. This guide would cover the process of Asset-Liability Management and the role of ALCO in Balance Sheet management. Methodology The guideline is based on the international tools and strategies practiced by the banks to manage its balance sheet risk. Different reports, researches, databases etc. published in Asset Liability Management were used as primary input for this paper. Limitations While utmost care has been given to cover every part of Asset Liability Management, a few complex issues related to Market Risk have not been 5 Bangladesh Bank Focus Group
  6. 6. covered in details. For example, in Value at Risk (VaR) the complex formulas for calculating the VaR has not been included. Disclaimers All data used as references and examples are hypothetical assumptions and does not relate to any bank or organization in any respect. 6 Bangladesh Bank Focus Group
  7. 7. PART A: POLICY STATEMENT Board or Management Committee of the Bank should set out the policy statement in at least for the followings and an annual review should be done taking into consideration of changes in the balance sheet and market dynamics. 1) Loan Deposit Ratio (LD): The AD ratio should be 80%-85%. However, the Loan Deposit ratio of the bank should go upto 110%. The Loan Deposit ratio = Loan/(Deposit+Capital+Funded Reserve) The ratio will be fixed based on the bank’s capital, Bank’s reputation in the market and overall depth of the money market. 2) Wholesale Borrowing Guidelines (WBG): The guideline should be set in absolute amount depending on bank’s borrowing capacity, historic market liquidity. The limit should be capped at the bank’s highest level of past borrowings. However, this limit can be increased based on the match- funding basis. 3) Commitments: The commitments Guideline limits should not exceed 200% of the unused wholesale borrowing capacity of the last twelve months. The limit can be increased if there are natural limitations on customer discretion to draw against committed lines or a bank’s access to additional funds via realisation of surplus statutory holdings. 4) Medium Term Funding Ratio (MTF): The MTF of a bank should not be less than 30%. The ideal scenario should be 45%. Given, the overall scenario of current market, it will be suitable to move towards the MTF limit of 45% as we progress. 5) Maximum Cumulative Outflow: MCO upto I month bucket should not exceed 20% of the balance sheet. 6) Liquidity Contingency Plan: A liquidity contingency plan needs to be approved by the board. A contingency plan needs to be prepared keeping in mind that enough liquidity is available to meet the fund requirements in liquidity crisis situation. An annual review of the contingency planning should be made. 7) Local Regulatory Compliance: There should be a firm policy on compliance to the Bangladesh Bank in respect of CRR, SLR, Capital adequacy etc. 7 Bangladesh Bank Focus Group
  8. 8. PART B: ORGANISATIONAL STRUCTURE OF ALM The Asset Liability Committee (ALCO) is responsible for balance sheet (asset liability) risk management. Managing the asset liability is the most important responsibility of a bank as it runs the risks for not only the bank, but also the thousands of depositors who put money into it. The responsibility of Asset liability Management is on the Treasury Department of the bank. Specifically, the Asset liability Management (ALM) desk of the Treasury Department manages the balance sheet. The results of balance sheet analysis along with recommendation is placed in the ALCO meeting by the Treasurer where important decisions are made to minimise risk and maximize returns. Typically, the organisational structure looks like the following: CEO / MANAGING DIRECTOR Head of Head of Head of Head of Head of Head of Head of Consumer Consumer Treasury Corporate Finance Credit Operations Banking Banking Banking Head of Asset Treasury: Responsible for ALM Liability Mgt (ALM) Money Market Dealers 8 Bangladesh Bank Focus Group
  9. 9. The key roles and responsibilities of the ALM Desk: 1) To assume overall responsibilities of Money Market activities. 2) To manage liquidity and interest rate risk of the bank. 3) To comply with the local central bank regulations in respect of bank’s statutory obligations as well as thorough understanding of the risk elements involved with the business. 4) Understanding of the market dynamics i.e competition, potential target markets etc. 5) Provide inputs to the Treasurer regarding market views and update the balance sheet movement. 6) Deal within the dealer’s authorised limit. PART C: PROCESS 1. ALCO & Asset Liability Management (ALM) The bank’s asset liability management is monitored through ALCO. The information flow in the ALCO can be diagramed as below: Feedback & Recommendation S Corporate Banking T Feedback & Recommendation R Feedback & Recommendation A Finance T E Depo-Adv Key Balance Sheet Features G Trend & Outlook Y & Analysis & B/S Status & Treasury Recommendation ALCO Recommended A Meeting Actions CEO C T I O Depo-Adv N Trend & Outlook Other Balance Sheet Features P Feedback & Recommendation O Other Depts. I N T Feedback & Recommendation S Consumer Banking 9 Bangladesh Bank Focus Group
  10. 10. 2. The Committee As the Treasury Department is primarily responsible for Asset Liability Management, ideally the Treasurer (or the CEO) is the Chairman of the ALCO committee. The committee consists of the following key personnel of a bank: - Chief Executive Officer / Managing Director - Head of Treasury / Central Accounts Department - Head of Finance - Head of Corporate Banking - Head of Consumer Banking - Head of Credit - Chief Operating Officer / Head of Operations The committee calls for a meeting once every month to set and review strategies on ALM. 3. Key Agendas ALCO attends the following issues while managing Balance Sheet Risks: (i) Review of actions taken in previous ALCO. (ii) Economic and Market Status and Outlook. (iii) Liquidity Risk related to the Balance Sheet. (iv) Review of the price / interest rate structure. (v) Actions to be taken. 4. ALCO Paper An ALCO paper is produced every month (usually by the Finance Department) which covers various issues related to Balance Sheet risk management. The ALCO paper is prepared before the ALCO meeting as the committee reviews the ALCO paper to set strategies. An ALCO paper typically covers the following: 4.1 Commentary A brief summary on the following issues for the last month are provided for review: 10 Bangladesh Bank Focus Group
  11. 11. • Combined as well as segmented (Current, STD, Term etc.) Deposit Trend for local and foreign currency. • Combined as well as segmented (Overdraft, Term etc.) Advance Trend for local and foreign currency. • Loan/Deposit Ratios. • Limit status and utilisation. 4.2 Interest Rate Trend of the Market Interest rate and yield curve for Treasury Bills, Overnight funds, term money, competitive bank’s published customer rates are included in the paper. 4.3 Balance Sheet A summarised or detailed version of the banks balance sheet for the current and previous month is provided to understand the trend in assets and liabilities. This portion also covers the variance in assets and liabilities against the target of the bank. 4.4 Key Management Indicators (Limits and Utilisation) The management of every bank sets different limits in managing risk and exposures. The current limit of all indicators along with recent utilisation is included for management review. Also trend for last few months are also included for better understanding of the behavior of the indicators. Some of the key management Indicators are as follows: (a) Wholesale Borrowing Guidelines: A key control in the management of liquidity risk is a set of guidelines placed on each bank’s need to raise funds from the wholesale market. This is a bank’s standard source of marginal funding. Typically, defined as the ability of a bank to raise funds from the wholesale market (or interbank market), it is also the most vulnerable given the large size of individual deposits and the relatively small number of potential counterparties. To reduce the bank’s dependency on funds from the wholesale market (or the interbank market), the ALCO should examine the funding products presently offered and consider whether other funding products may diversify/expand the bank’s funding base. Separate amounts may be established for local currency and foreign currency balance sheets. A bank’s capacity to borrow from the external wholesale market depends on a number of factors: - the size and turnover of the local market; our share of that market - the credit limits imposed by our counterparties, etc. 11 Bangladesh Bank Focus Group
  12. 12. Given the various factors influencing the bank’s fund-raising from the wholesale market, it is not possible to be absolutely sure of our exact capacity. A number of factors are considered for setting the wholesale borrowing guideline (WBG), which include - Balance sheet size of the bank. - Historical trend of market liquidity. - Credit Rating of the bank (to understand counterparty banks’ limits on the concerned bank). - Stability of liquidity and interest rates of the market. (b) Commitments: A bank’s liquidity is very much vulnerable to undrawn commitments by customers. Undrawn commitments may be unutilised by not drawing an overdraft limits of customers or any loan commitments, which has not been drawn by customers. Customers have the right to ask for these funds at any point in time and the bank is obligated to pay the customer. Thus a ceiling should be set on a bank’s commitments to customers. The undrawn commitment guideline may be established which relates the maximum level of undrawn commitments to the bank’s remaining unused wholesale borrowing capacity. These measures are to ensure that the banks are able to raise funds in order to meet customers’ demands for drawing on lines that they have granted to them. (c) Loan Deposit Ratio: Loan deposit ratio, typically calculated as the ratio of loans against deposits, is the most common way to see a bank’s liquidity position. In an ideal scenario, loan deposit ratio should not exceed 80% (as 20% of DTL is required for statutory requirements). However, a bank may decide to lend out its capital or raise funds from the interbank with a view that market interest rates would be low. But excessive lending (a high Loan Deposit Ratio) may expose a bank in serious liquidity and interest rate risk as the market liquidity may tighten any time. (d) Medium Term Funding Ratio: Banks typically make money by running mismatches, that is, by borrowing short term and lending long term. However, short term deposits may go out of the bank upon maturity, whereas a bank cannot call back long term lendings. Thus a bank has to find the right combination for longer term mismatch. Medium term funding ratio is calculated as the ratio of liabilities with a contractual maturity of more than one year to assets with a contractual maturity of more than one year. This ratio is intended to highlight the extent to which we are dependent on being able to roll over short term deposits in order to fund medium term assets. 12 Bangladesh Bank Focus Group
  13. 13. (e) Maximum Cumulative Outflow (MCO): Under normal conditions, the day-to-day management of liquidity relies on the effective control of cash flow. Maximum cumulative outflow (MCO) guidelines control the net outflow (inflow from asset maturity minus outflow from liability maturity) over the following periods: overnight, one week and one month. The Treasury operation of a bank will review its funding capabilities and recommend the guidelines to senior management. These guidelines will be based on the estimated wholesale funding shortfall after calculating the forecast/contractual cash flow of the entity under normal business conditions. The basis of cash flow measurement is to assume that funds are repaid on their contractual maturity date. For wholesale funds, this is sufficient. However, it is not realistic to assume that retail business will behave in this manner. In practice, current accounts and savings deposits are not withdrawn the next day and overdrafts are not repaid on demand. Retail business can be expected to follow more or less predictable patterns being influenced by seasonal factors and other trends. In monitoring liquidity, an estimate should be made of the expected change in such assets/liabilities with the resulting need for higher/lower funding from the wholesale market. Whilst systems constraints will often impede frequent and timely updating of cash flow data relating to retail business, it is nevertheless important to include realistic estimates within the MCO data which Treasury use to manage the bank’s aggregate cash requirements. The ability to raise cash by selling marketable assets may be factored into the MCO calculation but only to the extent that these assets are not already relied upon in order to meet internal or statutory reserve asset requirements. The MCO guideline is a ‘business as usual’ measure, which implies that necessary reserve liquidity must be maintained at all times and so cannot be counted towards meeting the MCO requirement. Whilst it may not be possible to include specific figures within MCO controls, banks should also be aware of cash flows from settlement of foreign exchange transactions and of intra-day exposures arising from the operation of the daily clearing systems. (f)Swapped Funds Guideline: A limit on the maximum amount (in absolute terms) that can be swapped from foreign currency liabilities in order to fund local currency assets, or, where appropriate, vice versa. The purpose of this measure is to prevent excessive dependence on the 13 Bangladesh Bank Focus Group
  14. 14. continued existence of an orderly foreign exchange market of sufficient depth to meet our funding needs. 4.5 Maturity Profile Mismatch A key issue that banks need to focus on is the maturity of its assets and liabilities in different tenors. A typical strategy of a bank to generate revenue is to run mismatch, i.e. borrow short term and lend longer term. However, mismatch is accompanied by liquidity risk and excessive longer tenor lending against shorter-term borrowing would put a bank’s balance sheet in a very critical and risky position. To address this risk and to make sure a bank does not expose itself in excessive mismatch, a bucket-wise (e.g. next day, 2-7 days, 7 days-1 month, 1-3 months, 3-6 months, 6 months-1 year, 1-2 year, 2-3 years, 3-4 years, 4-5 years, over 5 year) maturity profile of the assets and liabilities is prepared to understand mismatch in every bucket. However, as most deposits and loans of a bank matures next day (call, savings, current, overdraft etc.), bucket-wise assets and liabilities based on actual maturity reflects huge mismatch; although we know that all of the shorter tenor assets and liabilities will not come in or go out of the bank’s balance sheet. As a result, banks prepare a forecasted balance sheet where the assets and liabilities of the nature of current, overdraft etc. are divided into ‘ core and non-core’ balances, where core is defined as the portion that is expected to be stable and will stay with the bank; and non-core to be less stable. The distribution of core and non-core is determined through historical trend, customer behavior, statistical forecasts and managerial judgement; the core balance can be put into over 1 year bucket whereas non-core can be in 2-7 days or 3 months bucket. 14 Bangladesh Bank Focus Group
  15. 15. An example of Forecasted balance can be as follows: In BDT Mio TOTAL CALL 2-7D 8D-1M 1-3M 3M-1Y 1-5Y 5Y+ Reserve Assets 1,000 200 300 500 Interbank Placings 750 250 250 250 Custy Assets 4,000 300 250 1,400 300 250 1,000 500 Other Assets 500 200 300 Total Assets 6,250 950 550 1,650 550 250 1,800 500 Interbank Deposits (1,000) (750) (250) Custy Deposits (4,500) (1,200) (1,000) (1,200) (100) (200) (800) Capital & (500) (100) (400) Reserves Other Liabilities (250) (250) Total Liabilities (6,250) (2,200) (1,000) (1,450) (100) (300) (1,200) (0) Custy (2,000) (150) (1,850) Commitments Forward Contracts 250 100 50 100 Total Off-B/S (1,750) (0) 100 50 (50) (1,850) NET (1,750) (1,250) (350) 250 400 (1,900) 600 500 MISMATCH CUMULATIVE (1,250) (1,600) (1,350) (950) (2,850) (2,250) (1,750) NET MISMATCH Balance Sheet Gap 2,000 1,500 1,000 500 0 (500) (1,000) (1,500) (2,000) (2,500) Total Assets Total Liabilities NET MISMATCH 4.6 Liquidity Test for Contingencies The major risk a bank runs is liquidity risk. Under any circumstances a bank has to honor its commitments. As a result, it has to make sure that enough liquidity is available to meet fund requirements in situations like liquidity crisis in the 15 Bangladesh Bank Focus Group
  16. 16. market, policy changes by central bank, a name problem of the bank etc. So, a bank’s balance sheet should have enough liquid assets for meeting contingencies. Liquid assets can be as follows: • Reserve Assets. • Cash in Tills. • Specific Government Securities. • Foreign Currency in open position. • Specific FDRs. A liquidity contingency plan should be in place to ensure a bank is prepared to combat any crisis situation. A format of a liquidity contingency plan is attached in Appendix 3. 4.7 Interest Rate Profile Apart from liquidity risk, a bank also runs interest rate risk, which is the exposure of a bank's financial condition to adverse movements in interest rates. Accepting this risk is a normal part of banking and can be an important source of profitability and shareholder value. However, excessive interest rate risk can pose a significant threat to a bank's earnings and capital base. To address interest rate risk, an interest rate profile is prepared, where consolidated yield for assets and liabilities for different maturity buckets are shown for better understanding of interest profile. An example of the above is shown below: Variable/1 2D-1M 1-6M 6-12M 1-5Y 5Y+ D TOTAL 950 10% 2,200 11% 650 10% 150 12% 1,800 14% 500 14.5 ASSETS % TOTAL - 5% - 5.5% -150 7% -250 10% -400 0% -0 0% LIABI- 2,200 3,250 LTIES Fwd 0 150 100 0 0 0 Contracts Net - -900 600 -100 1,400 500 Mismatch 1,250 4.8 Local Regulatory Compliance Compliance to all regulatory issues including CRR, SLR, A/D ratio, Capital Adequacy, large exposures etc. along with any non-compliance and reasons behind so. 16 Bangladesh Bank Focus Group
  17. 17. 5. The ALCO Process The ALCO process or the ALCO meeting reviews the ALCO paper along with the prescribed agendas. The Chairman of the committee, that is the Treasurer or the CEO, raises issues related to the balance sheet. Treasurer suggests whether the interest rates need to be repriced, whether the bank needs deposits or advance growth, whether growth of deposits and advances should be on short or longer term, what would be the transfer price of funds among the divisions, what kind of interbank dependency the bank should have etc. In short, all issues related to liquidity and market risk are covered. Based on the analysis and views of the Treasurer, the committee takes decisions to reduce balance sheet risk while maximising profits. 6. Action Points The ALCO takes decisions for implementation of any/all of the following issues: • Need for appropriate Deposit mobilisation or Asset growth in right buckets to optimise asset-liability mismatch. • Cash flow (long/short) plan based on market interest rates and liquidity. • Need for change in Fund Transfer Pricing (FTP) &/or customer rates in line with strategy adapted. • Address to the limits that are in breach (if any) or are in line of breach and provide detailed plan to bring all limits under control. • Address to all regulatory issues that are under threat to non-compliance. 7. Implementation and Review of Strategies All ALCO members are provided with the minutes (Appendix 2) of the meeting within the next day. The minute includes: • The attendees. • The issues addressed. • The recommendations provided by the Chairman. • The action points that were fixed in the meeting. 17 Bangladesh Bank Focus Group
  18. 18. The members communicate the action points to their respective divisions to implement the strategies undertaken. 8. Special ALCO Meeting Apart from the regular monthly meeting, ALCO meeting is also called as and when any contingent situations arise. A very good example may be, during the Eid period. At those times, market liquidity dries out and overnight rates shoot up. Banks who are net borrowers from the market may be exposed to huge interest expense the high rates in the market. This is an ideal time for a special ALCO meeting, where the committee may take critical decisions for deposit mobilisation on an urgent basis for reducing dependency from the market. 9. Market Risk and Asset Liability Management Market Risk measures the risk of loss due to adverse movements in market prices or rates such as interest rates, FX rates. Following are the key management indicators for managing Market Risk: (a) Value at Risk (VaR): Value at Risk (VaR) is a statistical estimate of an upper boundary, within a specified confidence level, of the potential amount a trading position or portfolio could decrease in value during the time needed to close out a position. Specifically, it is a measure of potential loss from an event in a normal, everyday market environment. VaR is denominated in a currency, say Taka, where it measures the chance of losing Taka for a movement in interest rates for a given balance sheet scenario. For example, if a bank only has 1 month borrowing to fund 1 year customer lending, an increase in 1 month rates would result in incremental expense for the bank. VaR is estimated by assuming a 97.5% confidence level for movement in relevant Market Risk Factors. Let us construct a very simple example to understand the VaR methodology. In the following table a simple hypothetical balance sheet for a bank is shown, where it has BDT 100 mio 1 month borrowing to fund same amount of assets: 1 Month (BDT 1 Year (BDT Mio) Mio) ASSET 0 100 LIABILITY 100 0 MISMATCH (100) 100 18 Bangladesh Bank Focus Group
  19. 19. Say the market interest rate for 1 month is 8% and 1 year is 10%. Now, if we need to square the balance sheet gaps, we need to lend in 1month at 8% and need to borrow in 1 year tenor at 10%. Therefore, the expected Value at Risk to square the position will be: VaR = 100 * (8% * 30 days/360 days) – (100 * 10% * 360 days/360 days) = BDT (0.67 – 10) = BDT 9.33 mio Different organisations use different techniques or formulas for calculating VaR. An example of such VaR calculation is included in Appendix 4. (b) Factor Sensitivity: It is the sensitivity of an instrument/book to changes in a particular risk factor. For example, PV01 = the impact of ‘+1bp’ parallel move in the zero curve. (c) Management Action Trigger: The MAT It is a trigger level to warn of a persistently loss-making position. It defines management's tolerance for accepting market risk related losses on a rolling 30 day calendar day basis: MAT level = current VaR + latest rolling monthly P/L (21 business days) When a MAT is exceeded, trading management must review the current position and decide whether it should be maintained, reduced or closed out. PART D: KEY CONCEPTS Balance Sheet Risk Balance sheet risk can be categorised in to two major types of significant risk, which are liquidity and interest rate risks. Changes in market liquidity and or interest rates exposes banks/ business to the risk of loss, which may, in extreme cases, threaten the survival of institution. As such, it is important that senior management as well as the directors must understand the existence of such risk on the balance sheet and they should ensure that the structure of the institutions’ business and the level of balance sheet risk it assumes are effectively managed, that appropriate policies and procedures are established to control and limit these risks, and that resources are available for evaluating and controlling interest rate risk. 19 Bangladesh Bank Focus Group
  20. 20. Liquidity Risk The risk that bank or business will be unable to meet it’s commitment as they fall due leading to bankruptcy or rise in funding cost. It is the solvency of business and which has special reference to the degree of readiness in which assets can be converted into cash with out loss. Banks traditionally use the statutory liquidity reserve and their borrowing capacity in the volatile interbank money market as the source of liquidity. But a conscious approach to measure and monitor the liquidity is somewhat lacking in our market. We can learn and draw immense benefit by sharing the best practices, tools and techniques of liquidity management. Interest Rate Risk Interest rate risk is the exposure of a bank's financial condition to adverse movements in interest rates. Accepting this risk is a normal part of banking and can be an important source of profitability and shareholder value. However, excessive interest rate risk can pose a significant threat to a bank's earnings and capital base. Changes in interest rates affect a bank's earnings by changing its net interest income and the level of other interest-sensitive income and operating expenses. Changes in interest rates also affect the underlying value of the bank's assets, liabilities and off-balance sheet instruments because the present value of future cash flows (and in some cases, the cash flows themselves) change when interest rates change. Accordingly, an effective risk management process that maintains interest rate risk within prudent levels is essential to the safety and soundness of banks. Capital Adequacy The need to adopt the best international practices, given the globolisation of economies and businesses. As you are aware of “Basel Committee on Banking Supervision” and the emphasis on maintaining the Capital Adequacy commensurate to exposure or risk on balance sheet. The new “Basel Capital Accord” stipulates that “ Banks must hold capital commensurate with the level of interest rate risk they undertake”. As mentioned earlier, Changes in interest rates expose banks to the risk of loss, which may, in extreme cases, threaten the survival of the institution. In addition to adequate systems and controls, capital has an important role to play in mitigating and supporting this risk. As part of sound management, banks 20 Bangladesh Bank Focus Group
  21. 21. translate the level of interest rate risk they undertake, whether as part of their trading or non-trading activities, into their overall evaluation of capital adequacy, although there is no general agreement on the methodologies to be used in this process. In cases where banks undertake significant interest rate risk in the course of their business strategy, a substantial amount of capital should be allocated specifically to support this risk. 21 Bangladesh Bank Focus Group
  22. 22. APPENDIX 1 AN ALCO PAPER FOR KOROTOA BANK LTD. 22 Bangladesh Bank Focus Group
  23. 23. APPENDIX 2 A Demo ALCO Minutes ACTION POINTS Attendees: CEO (Name) (Korotoa Bank) Head of Corporate Banking (Name) ALCO MEETING Head of Consumer Banking (Name) (Mar 03, 2003 ) Head of Treasury (Name) Head of Operations (Name) Head of Credit (Name) Head of Finance (Name) Date Item Section Issue and proposed action To be Action No by (initials) (Date) 03/03/0 1 PREVIOUS MINUTES 1. Revision to customer interest rates were to be discussed & new rates to be established. 3 Deposit growth to be reviewed. 2 ECONOMY/ MARKET 1. No significant change in macro-economic factors, other than inflationary growth. 2. Inflation rose to 4.57% in November 2002, highest since FY1999. 3. Foreign Exchange reserve stands at US$ 1.78 bio in February 2003. 4. Broad Money (M2) recorded an increase of 5.29% during July-Dec 2002 period compared to same period last year. 5. ADP is expected to cut to BDT 16.5 bio from BDT 19.0 bio for FY 2003 6. Overnight rates in the downtrend after Eid. 7. Treasury Bill yield curve is expected to be stable with no major change in sight. 8. Secondary Market for Treasury Bills is emphasised the BBK. 3 LIQUIDITY 1. AD ratio has increased since the last meeting in Feb’03 2. Lcy Deposits has no major change in February. 3. Assets have grown by approx. BDT 250 mio in February. 4. Inter-bank borrowing is approx. BDT 1,000 mio. 5. AD ratio still within limits but there is clearly a need to grow our core deposit base 23 Bangladesh Bank Focus Group
  24. 24. and reduce reliance on inter-bank. 6. Medium Term Funding Ratio has improved due to growth in longer term deposits. 4 PRICING 1. Need to mobilise deposits on an urgent basis to reduce interbank dependency. 2. Growth of Advance and Deposits should be synchronised. 5 ACTION 1. Introduce new (increased) customer rates to encourage deposit accretion and emphasize need to focus on account profitability for assets w.e.f. 1st Mar. 2. Finance to determine impact of new rates on avg CB & C&I balance sheet of Jan’03 and advise ALCO. 3. Contingency action plan to manage stressed liquidity discussed & agreed. 24 Bangladesh Bank Focus Group
  25. 25. APPENDIX 3 Liq. Contingency Plan KOROTOA BANK CONTINGENCY ACTION PLAN TO MANAGE STRESSED LIQUIDITY SCOPE To establish an action plan to manage a stressed liquidity situation created by a name problem in the market. PURPOSE OF THE PLAN To provide a framework within which an effective response to a liquidity crisis can be managed. NB Stressed Liquidity is defined as a condition that arises from a sudden deterioration of the perceived safety and credibility of the Bank, resulting in substantial withdrawal of funds by depositors. TRIGGER POINTS Plan to be activated when two or more of the following conditions exist : 1. Bangladesh Bank has declined to open the Rediscount/Repo window at our request. 2. Call money market rates have exceeded 25% for more than 7 consecutive days. 3. Call facilities have been declined by the market or a premium over market rates has been imposed on our borrowing. 4. Consolidated AD ratio has exceeded 100% for more than 15 days. Version date: February, 2003 Approved at ALCO Meeting March 03, 2003 25 Bangladesh Bank Focus Group
  26. 26. KOROTOA BANK CONTINGENCY ACTION PLAN TO MANAGE STRESSED LIQUIDITY PHASE 1 – IMPENDING CRISIS 1. Phase 1 – Team - (ALCO Members) - Chief Executive Officer - Head of Treasury - Head of Finance - Head of Corporate Banking - Head of Consumer Banking - Head of Credit - Head of Operations 2. Action Points Responsibility 2.1 Investigate the underlying cause of the crisis to establish: Team - Extend and timing of the crisis - Duration of the crisis - Remedial action to avoid the crisis, agree any external/ internal communications statement etc. 2.2 Advise all Divisional Heads of the crisis and cancel leave commitments of Chief Executive key personnel. 2.3 Review liquid and market assets portfolio by maturity and prepare a Head of Treasury liquidation strategy. Head of Finance 2.4 Liquidate any long forex positions and reduce forex open position to a Head of Treasury minimum. 26 Bangladesh Bank Focus Group
  27. 27. KOROTOA BANK CONTINGENCY ACTION PLAN TO MANAGE STRESSED LIQUIDITY PHASE 2 - CRISIS SITUATION 1. Phase 1 – Team - (ALCO Members) - Chief Executive Officer - Head of Treasury - Head of Finance - Head of Corporate Banking - Head of Consumer Banking - Head of Credit - Head of Operations 2. Action Points Responsibility 2.1 Communication 2.1.1 Convene Emergency ALCO Meeting to review the crises, agree content Chief Executive of any external /internal messages and delegate tasks. 2.1.2 Inform Bangladesh Bank of crisis and proposed remedial action, if Chief Executive deemed necessary. Head of Treasury 2.1.3 Brief Dealers. Head of Treasury 2.1.4 Brief Relationship Managers and Branch Managers. Head of Corporate Head of Consumer 27 Bangladesh Bank Focus Group
  28. 28. KOROTOA BANK CONTINGENCY ACTION PLAN TO MANAGE STRESSED LIQUIDITY PHASE 2 - CRISIS SITUATION (cont) Responsibility 2.2 Assessment and Action 2.2.1 Confirm the liquid and market asset portfolio for initial selective Head of Treasury liquidation. 2.2.2 Assess the level of interbank borrowing capacity and raise funds to Head of Treasury meet liquidity from the most reliable sources. 2.2.3 Approach Bangladesh Bank for Repo. Head of Treasury 2.2.4 Selling Fcy from forex open position limit to generate Lcy liquidity. Head of Treasury 2.2.5 Approach Bangladesh Bank for extended use of the rediscount Head of Treasury window. 2.2.6 Monitor closely withdrawal patterns, under report to Head of Head of Treasury Treasury. 2.2.7 Do not approve early redemption of deposits without specific Head of Corporate approval of the Chief Executive/ Head of Treasury Head of Consumer 2.2.8 Assess overall level of loans/OD and ensure no incremental Head of Corporate drawdown. No excess to be allowed. Head of Consumer 2.2.9 Assess overall Advances portfolio and activate plan Head of Corporate contract/recall/seek repayment from customers. Head of Consumer 28 Bangladesh Bank Focus Group
  29. 29. KOROTOA BANK CONTINGENCY ACTION PLAN TO MANAGE STRESSED LIQUIDITY CRITICAL CONTACT INFORMATION 1. Management Team Work Telephone Home Telephone - Chief Executive (Name) XXXXXXX XXXXXXX - Head of Treasury XXXXXXX XXXXXXX (Name) - Head of C&IB XXXXXXX XXXXXXX (Name) - Head of Finance XXXXXXX XXXXXXX (Name) - Head of Consumer Banking XXXXXXX XXXXXXX (Name) - Head of Operations XXXXXXX XXXXXXX (Name) - Head of Credit XXXXXXX XXXXXXX (Name) 2. Central Bank - Governor XXXXXXX XXXXXXX - General Manager (BR&PD) XXXXXXX XXXXXXX - General Manager (FEPD) XXXXXXX XXXXXXX 29 Bangladesh Bank Focus Group
  30. 30. KOROTOA BANK CONTINGENCY ACTION PLAN TO MANAGE STRESSED LIQUIDITY Government and/or Central Bank Statutory Holdings / Liquidity Requirements Regulation Parameter/Formula Comprising Cash reserve 4% of liabilities Lcy cash at Central Bank Liquidity reserve 16% of liabilities Treasury Bills Cash in Tills Fcy balance with Central Bank Lcy balance with Central Bank Selected Govt Bonds Money Market Instruments Comprising Marketable Securities and Reserve Liquidity Instrument Features/Restrictions Included in Marketable Or Reserve Treasury bills Issued by Central Bank weekly auction at discount M&R Tenors are 28, 91, 182, 364 days, 2 years and 5 years. 30 Bangladesh Bank Focus Group
  31. 31. KOROTOA BANK CONTINGENCY ACTION PLAN TO MANAGE STRESSED LIQUIDITY CONTINGENCY FUNDING PLAN Local Book Money Market • Term Deposit • Call Money • Repo Central Bank (Marketable Securities and Reserve Portfolio) • Repo of Treasury bills • Encashment of surplus balance with Central Bank Other • Cash in hand FCY Book Money Market • Term Deposit • Utilisation of surplus Nostro balances 31 Bangladesh Bank Focus Group
  32. 32. KOROTOA BANK CONTINGENCY ACTION PLAN TO MANAGE STRESSED LIQUIDITY QUANTIFICATION OF AMOUNT OF CONTINGENCY FUNDS - LOCAL CURRENCY BDT IN MILLION Sources of contingency funds Estimated Cost to Korotoa During Maximum stressed liquidity Available Funds Money Market F Term Deposit 500 12.00% Central Bank (Marketable Securities and Reserve Portfolio) F Repo facility for Treasury Bills 900 9.00-10.00% F Rediscounting window 500 6.00% F Balance with CB (Excess of CRR) 20 0.00% Other F Lcy Cash in hand 50 0.00% 32 Bangladesh Bank Focus Group
  33. 33. KOROTOA BANK CONTINGENCY ACTION PLAN TO MANAGE STRESSED LIQUIDITY QUANTIFICATION OF AMOUNT OF CONTINGENCY FUNDS FOREIGN CURRENCY Sources of contingency funds Formula/Parameters Estimated Cost to during For basis of Maximum Korotoa stressed liquidity calculation Available Funds Money Market (Marketable Securities) Interbank Deposit Libor+0.50bps USD 5 mio 2.00- 3.50% Reserve 1 month Libor BDT 120 mio 1.25%- (USD 2 mio 1.75% @60.0) Signature Chief Executive Officer, Bangladesh Head of Corporate Banking Head of Treasury Head of Consumer Banking Head of Finance Senior Credit Officer Head of Operations 33 Bangladesh Bank Focus Group
  34. 34. APPENDIX 4 A common formula for Value at Risk (VaR) calculation: Value at Risk = 2 X Factor Sensitivity X Volatility Where, 2 relate to 2 standard deviations (97.5 % confidence level). For Interest Rates - using absolute volatility: Value at Risk = 2 X Factor Sensitivity X Volatility  Duration  × Value at Risk = 2 ×  Net Present Value ×    (1+ Yieldt −1 ) Volatility   =2× (d y )  × σ2 ( −  Yt Yt −1 ,..........,Yn −1 − Yn ) C × VAR  d (1 + Yt −1 )  (1 + Yt −1 ) y    For Interest Rates - using relative volatility: Value at Risk = 2 × FactorSens itivity × Volatility  Duration  × VAR= 2 × Net Present Value ×  ( × )   (1+ Yieldt −1 ) Yield t VolatilityR   d        C  y Y Y−  VAR = 2 ×  ×  × Yt × σ2  t Y − ,....., n 1 Y    (1 + Yt −1 ) y (1 + Yt −1 )  d  t 1  n    Aggregation of UVAR from several positions: Zero correlation of losses: This approach assumes that the positions are independent and may or may not act as hedges. 34 Bangladesh Bank Focus Group
  35. 35. VAR = VAR 2 + VAR 2+ + 2 P ' folio 1 2 ................. VAR n n VAR P ' folio = ∑ VAR 2 i i =1 100% correlation of losses: This approach assumes that a loss is incurred on each and every position. VAR P ' folio = Abs(VAR ) + Abs(VAR 2 )+ ............. ............+ Abs(VAR n ) 1 n VAR P ' folio = ∑ Abs(VAR i ) i =1 Perfect correlation between positions: This approach assumes that positions are perfect hedges for each other. VAR P ' folio = VAR + VAR + .... ..... ...... ..... ..+VAR n 1 2 n VAR P ' folio = ∑ VAR i i =1 35 Bangladesh Bank Focus Group
  36. 36. KOROTOA BANK A S S E T L IA B I L I T Y M A N A G E M E N T ALCO PAPERS FOR THE MONTH OF: FEBRUARY 2003 36 Bangladesh Bank Focus Group
  37. 37. 28- Feb- COMMENTARY Date 03 Liquidity LCY Month on Month Balance Sheet Movements `- Corporate Banking Deposits increased by BDT 100 mio; Mainly due to FDR by: (a) 'A' Company (BDT 50 mio) (b) 'Z' Corporation (BDT 50 mio). `- Corporate Banking Advances decreased by BDT 150 mio; Mainly due to overdraft repayment by: (a) 'A' Company (BDT 50 mio) (b) 'Z' Corporation (BDT 50 mio). `- Consumer Banking Deposits decreased by BDT 100 mio; Mainly due to maturity of FDR of BDT 50 mio. `- Consumer Banking Advances decreased by BDT 100 mio; Mainly due to overdraft repayment of BDT 50 mio and maturity of fixed loan of BDT 50 mio. FCY Month on Month Balance Sheet Movements `- FCY balance sheet remained relatively unchanged. Other Liquidity Issues `- Savings Deposit of corporate banking has decreased by 2%, whereas FDR has increased by 2.5%. 37 Bangladesh Bank Focus Group
  38. 38. 28- Feb- FINANCIAL ENVIRONMENT Date 03 1) TREASURY BILLS (a) Treasury Bills are auctioned at every Monday. (b) Typical Rates TENOR INTEREST RATES (%) Jan-03 Dec-02 Nov-02 Oct-02 Sep-02 Aug-02 Jul-02 Jun-02 May-02 Apr-02 Mar-02 Feb-02 Jan-02 28 D 7.80% 8.00% 7.40% 6.70% 6.30% 5.90% 5.40% 4.60% 4.30% 4.10% 4.10% 4.50% 4.10% 91 D 9.00% 7.50% 7.50% 6.90% 7.00% 5.80% 5.80% 5.10% 5.00% 5.10% 5.20% 4.90% 4.90% 182 D 7.80% 7.80% 7.60% 7.20% 6.40% 5.80% 5.80% 5.00% 5.00% 5.00% 5.00% 5.00% 4.90% 364 D 10.10% 10.00% 9.50% 8.00% 6.40% 6.30% 6.20% 5.80% 5.90% 5.80% 5.80% 5.20% 5.20% 2Y 10.90% 10.70% 10.10% 9.00% 6.90% 6.90% 7.00% 6.90% 6.80% 6.80% 6.90% 6.90% 6.40% 5Y 11.50% 11.20% 10.90% 10.60% 10.40% 9.30% 8.60% 8.60% 8.70% 8.80% 9.40% 9.40% 9.50% 2) Overnight rates ranged between 5-7% for the month. 38 Bangladesh Bank Focus Group
  39. 39. 39 Bangladesh Bank Focus Group
  40. 40. 28- Feb- COMPETITIVE ENVIRONMENT Date 03 DEPOSIT BANK 'A' BANK 'B' BANK 'C' BANK 'D' KOROTOA BANK SAVINGS 5.00 7.50 7.50 6.50 8.00 STD 4.00 - - - - 1 MNTH - - - - - 3 MNTH 7.00 9.25 9.00 7.50 9.00 6 MNTH 7.25 9.50 9.50 8.00 9.25 12 MNTH 7.75 11.00 9.75 8.25 9.25 24 MNTH 8.00 11.50 - - 10.00 36 MNTH 8.00 12.00 - - 10.50 LENDING Agriculture 12.00-16.00 9.00-13.00 11.00-16.00 12.00 14.00 Export Credit 7.00-9.00 7.00 7.00 7.00-9.00 7.00 Small Cottage Ind. 11.50-12.00 11.50-13.00 14.00-16.00 12.00 15.00 Term Loans 9.00-13.00 13.00-15.00 12.50-16.50 15.00 15.00 Working Cap 14.00 12.00-15.00 10.00-15.50 13.25-15.00 15.00 Commentary 1) FDR interest rates varies with amount and tenor for all banks. 2) Interest rate is fixed and non- negotiable. 40 Bangladesh Bank Focus Group
  41. 41. BALANCE SHEET SUMMARY Currency: BDT (Mio) Date 28- Feb-03 Current ASSETS Current Month Previous Month LIABILITIES Month Previous Month Reserve Assets 1,000 900 Interbank Deposits (1,000) (625) Interbank Placings 750 900 Corp. Custy Deposits (1,500) (1,400) Corp. Custy Assets 2,500 2,350 Cons. Custy Deposits (3,000) (3,100) Cons. Custy Assets 1,500 1,400 Capital & Reserves (500) (625) Other Assets 500 600 Other Liabilities (250) (400) Total Assets 6,250 6,150 Total Liabilities (6,250) (6,150) ASSET CATEGORIES LIABILITY CATEGORIES Current CORPORATE ASSETS Current Month Previous Month CORPORATE LIABILITIES Month Previous Month Overdraft 750 700 Savings Deposits (500) (550) Fixed Loan 1,000 1,100 Current Deposits (400) (400) Others 750 550 FDR (300) (350) Others (300) (100) Current CONSUMER ASSETS Current Month Previous Month CONSUMER LIABILITIES Month Previous Month Overdraft 500 600 Savings Deposits (900) (900) Fixed Loan 500 450 Current Deposits (600) (650) Others 500 350 FDR (500) (550) Others (1,000) (1,000) 41 Bangladesh Bank Focus Group
  42. 42. LIQUIDITY KEY INDICATORS 28- Feb- Currency: BDT (Mio) Date 03 Current Key Management Indicators Month Previous Month Limits Excess? Wholesale Borrowing Guidelines 1,000 625 2,000 NO Commitments 1,500 1,800 2,250 NO Loan Deposit Ratio 89% 83% 100% NO Medium Term Funding Ratio 60% 54% 50% NO Swapped Funds Guideline 750 700 1,000 NO Maximum Cumulative Outflow (MCO) 1 Day -1,250 -1,300 -1,500 NO 2-7 Day -1,600 -1,500 -2,000 NO 8 Days to 1 Month -1,350 -2,240 -3,000 NO 42 Bangladesh Bank Focus Group
  43. 43. FORECAST LIQUIDITY SUMMARY BDT Currency: (Mio) Date 28- Feb-03 TOTAL CALL 2-7D 8D-1M 1-3M 3M- 1Y 1-5Y 5Y+ Reserve Assets 1,000 200 300 500 Interbank Placings 750 250 250 250 Custy Assets 4,000 300 250 1,400 300 250 1,000 500 Other Assets 500 200 300 Total Assets 6,250 950 550 1,650 550 250 1,800 500 Interbank Deposits (1,000) (750) (250) Custy Deposits (4,500) (1,200) (1,000) (1,200) (100) (200) (800) Capital & Reserves (500) (100) (400) Other Liabilities (250) (250) Total Liabilities (6,250) (2,200) (1,000) (1,450) (100) (300) (1,200) Custy Commitments (2,000) (150) (1,850) Forward Contracts 250 100 50 100 Total Off- B/S (1,750) 100 50 (50) (1,850) NET MISMATCH (1,750) (1,250) (350) 250 400 (1,900) 600 500 CUMULATIVE NET MISMATCH (1,250) (1,600) (1,350) (950) (2,850) (2,250) (1,750) LIMITS (1,500) (2,000) (3,000) 43 Bangladesh Bank Focus Group
  44. 44. 28- Feb- LIQUIDITY STRESS Currency BDT (Mio) Date 03 Local Currency Day 1 Day 2 Day 3 Total Stress Day 1 Day 2 Day 3 Net Cumulative Cashflow Marketable Assets 0 0 0 (Combined) 250 303 328 Reserve Assets 250 250 250 Stress Cash Flow -25 30 45 Surplus/ Shortfall in Reserve/Marketable Assets 225 280 295 Foreign Currency Day 1 Day 2 Day 3 Other Sources of Liquidity Day 1 Day 2 Day 3 Marketable Assets 0 0 0 NONE Reserve Assets 10 11 13 Stress Cash Flow 15 12 20 Surplus/ Shortfall in Reserve/Marketable Net Cumulative Cashflow Assets 25 23 33 (Combined) 250 303 328 USD Currency Day 1 Day 2 Day 3 Stress Compliance Surplus/Shortfall in Reserve/Marketable Assets 3 Day Stress Compliance Yes 44 Bangladesh Bank Focus Group
  45. 45. 28- Feb- INTEREST RATE RISK Currency BDT (Mio) Date 03 Variable/1D 2D-1M 1-6M 6-12M 1-5Y 5Y+ TOTAL ASSETS 950 10.00% 2,200 11.00% 650 10.00% 150 12.00% 1,800 14.00% 500 14.50% TOTAL LIABILTIES (2,200) 5.00% (3,250) 5.50% (150) 7.00% -250 10.00% (400) 0.00% 0 0.00% Fwd Contracts 0 150 100 0 0 0 Net Mismatch (1,250) (900) 600 (100) 1,400 500 45 Bangladesh Bank Focus Group
  46. 46. LOCAL REGULATORY COMPLIANCE Date 28- Feb-03 REGULATIONS COMPLIANCE COMMENTS (1) Cash Reserve Requirements (CRR) and Statutory Liquidity Ratio (SLR). The bank is required to place the following percentage of their customer deposits with the central bank, interest free on a monthly basis and Govt. Yes Securities and Treasury Bills. CRR-4% of average Time and Demand Deposits as at two months prior period SLR 16% of a average Time and Demand deposits as at two months prior period. (2) Fcy Balance held with Central Bank will not qualify for CRR (3) Advance to Deposit Ratio Yes Bank is not to exceed a total (lcy + fcy) advances to deposit ratio of 120% as per statutory liquidity requirement. Central Bank does not have a set guideline but they usually come back if the ratio is over 90% for a long time. (4) Bangladesh Central Bank Position Yes Banks operating in Bangladesh are required to maintain credit balance with the Central Bank minimum 4% of time and Demand Deposits as CRR and the accounts must not be overdrawn (5) Capital Adequacy Ratio Yes Banks operating in Bangladesh are required to maintain a minimum capital at 8% of total risk weighted assets (6) Large Exposures Yes Banks operating in Bangladesh are required to restrict their lending to any large single relationship to 15% of their capital and with the approval of Central Bank it can be increased to 100% of their capital Note Regulatory changes * Banks operating in Bangkadesh are required to maintain a minimum capital at 9% (core apital of which minimum 4.5%) of total risk weighted assets. 46 Bangladesh Bank Focus Group
  47. 47. 28- Feb- CONTRACTUAL LIQUIDITY SUMMARY Currency BDT (Mio) Date 03 TOTAL CALL 2-7D 8D-1M 1-3M 3M- 1Y 1-5Y 5Y+ Reserve Assets 1,000 200 300 500 Interbank Placings 750 250 250 250 Custy Assets 4,000 1,250 100 600 300 250 1,000 500 Other Assets 500 500 Total Assets 6,250 2,200 400 850 550 250 1,500 500 Interbank Deposits (1,000) (750) (250) Custy Deposits (4,500) (1,200) (1,000) (1,200) (100) (200) (800) Capital & Reserves (500) (100) (400) Other Liabilities (250) (250) Total Liabilities (6,250) (2,200) (1,000) (1,450) (100) (300) (1,200) 0 Custy Commitments (2,000) (150) (1,850) Forward Contracts 250 100 50 100 Total Off- B/S (1,750) 0 100 50 (50) (1,850) NET MISMATCH (1,750) 0 (500) (550) 400 (1,900) 300 500 CUMULATIVE NET MISMATCH 0 (500) (1,050) (650) (2,550) (2,250) (1,750) 47 Bangladesh Bank Focus Group
  48. 48. 28- Feb- YIELD BAROMETER Date 03 Overdraft Fixed Loan Others Savings A/C Current A/C FDR Others 48 Bangladesh Bank Focus Group
  49. 49. 49 Bangladesh Bank Focus Group