Asset liability management (ALM) is the process of managing a bank's assets and liabilities to maximize profits and minimize risk. It involves planning asset and liability maturities and interest rates to ensure adequate liquidity and stable net interest income. The ALM process includes risk identification, measurement, and management of liquidity risk, interest rate risk, currency risk, and other risks. Banks use ALM techniques like maturity gap analysis, duration analysis, simulation, and value at risk to measure different types of risks. The asset liability committee (ALCO) oversees the ALM process and makes strategic decisions about the balance sheet, pricing, and risk management.
This presentations chalks out in detail information about ALM in Indian Bank. It starts with the basics of Balance sheet; applicability of ALM in real life; Evolution and then starts with main topics of ALM like structured statement; Liquidity risk, its management; currency risk and finally ends with Interest Risk management.
Links to Video’s in the ppt
Balance Sheet
http://www.investopedia.com/terms/b/balancesheet.asp
NII/NIM
http://www.investopedia.com/terms/n/netinterestmargin.asp
www.abhijeetdeshmukh.com
Interest rate risk management for banks under Basel II, presentation by Christine Brown, Department of Finance , The University of Melbourne, Shanghai, December 8-12, 2008
This presentations chalks out in detail information about ALM in Indian Bank. It starts with the basics of Balance sheet; applicability of ALM in real life; Evolution and then starts with main topics of ALM like structured statement; Liquidity risk, its management; currency risk and finally ends with Interest Risk management.
Links to Video’s in the ppt
Balance Sheet
http://www.investopedia.com/terms/b/balancesheet.asp
NII/NIM
http://www.investopedia.com/terms/n/netinterestmargin.asp
www.abhijeetdeshmukh.com
Interest rate risk management for banks under Basel II, presentation by Christine Brown, Department of Finance , The University of Melbourne, Shanghai, December 8-12, 2008
In this article how risk management in banks is an important concept, what type of risks banks faces and how they curb it through risk management model is described
In this article how risk management in banks is an important concept, what type of risks banks faces and how they curb it through risk management model is described
Bank Management, leadershi, and administration .pptetebarkhmichale
KCB Retailer Finance: Features, Eligibility, Application, and More
Retail businesses have a vital economic role that drives consumer spending and contributes to job creation. However, it’s no secret that these businesses often face challenges managing their finances, particularly inventory management. Luckily, KCB Retailer Finance steps in as a valuable solution for this.
KCB Bank is arguably one of the most reputable financial institutions in Kenya. The bank launched retailer finance as a viable option for retailing SMEs. The financial product enables businesses to expand and, consequentially, see rising profit margins.
In this article, I’ll guide you through KCB retailer finance, its features, the eligibility criteria, and how to apply for this loan. We’ll also check out the terms and conditions you must remember.
1. Overview of KCB Retailer Finance
KCB Retailer Finance is a financial product by KCB Bank that offers the unique financing needs of retailers to stock up their business. You effectively overcome financial constraints and grow your operations with KCB retailer finance.
At its core, retailer finance provides capital and financial resources to retailers to support their business activities. The financing aim to help retailers optimise their cash flow, invest in inventory, upgrade their equipment, and enhance their overall competitiveness in the market.
The key aspect of KCB Retailer Finance is providing collateral-free working capital loans. Retailers can use the loan to cover their day-to-day operational expenses. With access to working capital, retailers can smoothen the flow of operations, seize business opportunities, and sustain their growth trajectory.
Target Audience for the Retailer Finance
The target audience for KCB retailer finance is primarily businesses operating in the retail sector, ranging from small and medium-sized enterprises (SMEs) to large retail chains. This encompasses various types of retailers, including but not limited to:
No.1: Independent Retailers
KCB Retailer financing targets small, locally owned retail businesses operating as single stores or small chains. The financing supports them irrespective of whether they specialise in specific product categories or serve niche markets.
No. 2: Franchise Retailers
KCB Retailer Finance: Features, Eligibility, Application, and More
Retail businesses have a vital economic role that drives consumer spending and contributes to job creation. However, it’s no secret that these businesses often face challenges managing their finances, particularly inventory management. Luckily, KCB Retailer Finance steps in as a valuable solution for this.
KCB Bank is arguably one of the most reputable financial institutions in Kenya. The bank launched retailer finance as a viable option for retailing SMEs. The financial product enables businesses to expand and, consequentially, see rising profit margins.
In this article, I’ll guide you through KCB retailer finance, its features, the elig
Product Management
KCB Retailer Finance: Features, Eligibility, Application, and More
Retail businesses have a vital economic role that drives consumer spending and contributes to job creation. However, it’s no secret that these businesses often face challenges managing their finances, particularly inventory management. Luckily, KCB Retailer Finance steps in as a valuable solution for this.
KCB Bank is arguably one of the most reputable financial institutions in Kenya. The bank launched retailer finance as a viable option for retailing SMEs. The financial product enables businesses to expand and, consequentially, see rising profit margins.
In this article, I’ll guide you through KCB retailer finance, its features, the eligibility criteria, and how to apply for this loan. We’ll also check out the terms and conditions you must remember.
1. Overview of KCB Retailer Finance
KCB Retailer Finance is a financial product by KCB Bank that offers the unique financing needs of retailers to stock up their business. You effectively overcome financial constraints and grow your operations with KCB retailer finance.
At its core, retailer finance provides capital and financial resources to retailers to support their business activities. The financing aim to help retailers optimise their cash flow, invest in inventory, upgrade their equipment, and enhance their overall competitiveness in the market.
The key aspect of KCB Retailer Finance is providing collateral-free working capital loans. Retailers can use the loan to cover their day-to-day operational expenses. With access to working capital, retailers can smoothen the flow of operations, seize business opportunities, and sustain their growth trajectory.
Target Audience for the Retailer Finance
The target audience for KCB retailer finance is primarily businesses operating in the retail sector, ranging from small and medium-sized enterprises (SMEs) to large retail chains. This encompasses various types of retailers, including but not limited to:
No.1: Independent Retailers
KCB Retailer financing targets small, locally owned retail businesses operating as single stores or small chains. The financing supports them irrespective of whether they specialise in specific product categories or serve niche markets.
No. 2: Franchise Retailers
KCB Retailer Finance: Features, Eligibility, Application, and More
Retail businesses have a vital economic role that drives consumer spending and contributes to job creation. However, it’s no secret that these businesses often face challenges managing their finances, particularly inventory management. Luckily, KCB Retailer Finance steps in as a valuable solution for this.
KCB Bank is arguably one of the most reputable financial institutions in Kenya. The bank launched retailer finance as a viable option for retailing SMEs. The financial product enables businesses to expand and, consequentially, see rising profit margins.
In this article, I’ll guide you through KCB retailer finance, its
Asset Liability Management and Risk Management over laps each other on many grounds, they are the two very important concepts of the study of Financial Systems.
Asset liability management (ALM) can be defined as the comprehensive and dynamic framework for measuring, monitoring and managing the financial risks associated with changing interest rates, foreign exchange rates and other factors that can affect the organisation’s liquidity.
Interest rate risk management what regulators want in 2015 7.15.2015Craig Taggart MBA
Areas covered in this section
Why Interest Rate Risk (IRR) should not be ignored
• Forward Rate Agreements (FRA’s) Forwards, Futures
• Swaps, Options
Why Bank Regulators continue to have a poor handle on interest rate risk
• Interest Rate Caps, floors, Collars
• LIBOR and UBS & Barclays rigging rates
• How should Financial Institutions determine which IRR vendor models are appropriate?
IRR Measurement methodologies are institutions
asset liability mgt in commercial banks.pptxJohn278053
sset and liability management (ALM) is a practice used by financial institutions to mitigate financial risks resulting from a mismatch of assets and liabilities. ALM strategies employ a combination of risk management and financial planning and are often used by organizations to manage long-term risks that can arise due to changing circumstances.
Managing balance sheet liquidity & long term funding Dr Rajeev Jain
Managing balance sheet liquidity and long term funding
• Do the company have the right cash management processes?
• The importance of accurately forecast company cash flow with liquidity management
• Looking at your balance sheet frequently: Do the company has sufficient funding sources?
• Ensuring the right balance of credit and non-credit service utilisation for funding process
• Learning about rebuilding the balance sheet and turning their problem into growth
• Establishing long term stability and security of our funding in turn helps protect our liquidity position in the crisis
• Building necessary tools and methods to achieve properly structured balance sheet
• Managing complex situations precisely through flexible values (general direction), values with longer lifespan than goals or objectives and past and present corporate actions
MODULE 3:
Credit Risks Credit Risk Management models - Introduction, Motivation, Funtionality of good credit. Risk Management models- Review of Markowitz’s Portfolio selection theory –Credit Risk Pricing Model – Capital and Rgulation. Risk management of Credit Derivatives.
Active Management of the Debt Portfolio - 2013 NACUBO ConferenceRemy Hathaway
Presentation from 2013 NACUBO in Indianapolis with a focus on risk management. Co-presented with Thomas Richards (University of Missouri System) and Sherry Mondou (University of Puget Sound). My slides are pp3-12.
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
2. Assets Liability Management
It is a dynamic process of Planning,
Organizing & Controlling of Assets &
Liabilities- their volumes, mixes, maturities,
yields and costs in order to maintain liquidity
and NII.
Equities Liabilities Assets
3. What is Asset Liability Management?
The process by which an institution manages its
balance sheet in order to allow for alternative interest
rate and liquidity scenarios
Banks and other financial institutions provide
services which expose them to various kinds of risks
like credit risk, interest risk, and liquidity risk
Asset-liability management models enable
institutions to measure and monitor risk, and provide
suitable strategies for their management.
4. Objectives
O
B
J
E C T I
V
E
S
Liquidity Risk
Management
Interest Rate
Risk
Management
Currency Rate Risk
Management
Profit Planning
Growth
Projection
Balancing
A & L
7. 3 Pillars of ALMInformationSystem
Organisation
Process
8. ALM Information Systems
Usage of Real Time information system to gather the
information about the maturity and behaviour of loans and
advances made by all other branches of a bank
ABC Approach :
Analysing the behaviour of asset and liability products in the top
branches as they account for significant business
Then making rational assumptions about the way in which assets and
liabilities would behave in other branches
The data and assumptions can then be refined over time as the
bank management gain experience
The spread/speed of computerisation will also help banks in
accessing data.
9. ALM Organization
The board should have overall responsibilities and should set the limit for liquidity,
interest rate, foreign exchange and equity price risk
The Asset - Liability Committee (ALCO)
ALCO, consisting of the bank's senior management (including CEO) should be
responsible for ensuring adherence to the limits set by the Board
Is responsible for balance sheet planning from risk - return perspective
including the strategic management of interest rate and liquidity risks
The role of ALCO includes product pricing for both deposits and advances,
desired maturity profile of the incremental assets and liabilities,
It will have to develop a view on future direction of interest rate movements
and decide on a funding mix between fixed vs floating rate funds, wholesale vs
retail deposits, money market vs capital market funding, domestic vs foreign
currency funding
It should review the results of and progress in implementation of the decisions
made in the previous meetings
12. Definition :
Liquidity risk refers to the risk that the institution might not be
able to generate sufficient cash flow to meet its financial
obligations
Liquidity Risk
Effects
Risk to bank’s earnings
Reputational risk
Contagion effect
Liquidity crisis can lead to runs on Banks & their failures can
affect Global economies
13. Funding risk
Arises due to unanticipated
withdrawals of the deposits
from wholesale or retail
clients
Time risk
It arises when an asset
turns into a NPA. So, the
expected cash flows are no
longer available to the
bank.
Call Risk
Due to crystallisation of
contingent liabilities and
unable to undertake
profitable business
opportunities when
available.
Liquidity risk arises from funding of long term assets by short term
liabilities, thus making the liabilities subject to refinancing
14. Factors affecting Liquidity Risk
over extension of credit
High level of NPAs
Poor AML Policy
Poor asset quality
Mismanagement Reliance on a few
wholesale depositors
Large undrawn loan commitments
Lack of appropriate liquidity policy & contingent
plan
15. Statement of Structural Liquidity
All Assets & Liabilities to be reported as per their maturity
profile into 8 maturity Buckets:
i. 1 to 14 days
ii. 15 to 28 days
iii. 29 days and up to 3 months
iv. Over 3 months and up to 6 months
v. Over 6 months and up to 1 year
vi. Over 1 year and up to 3 years
vii. Over 3 years and up to 5 years
viii. Over 5 years
16. STATEMENT OF STRUCTURAL LIQUIDITY
Places all cash inflows and outflows in the maturity
ladder as per residual maturity
Maturing Liability: cash outflow
Maturing Assets : Cash Inflow
Classified in to 8 time buckets
Mismatches in the first two buckets not to exceed
20% of outflows
Shows the structure as of a particular date
Banks can fix higher tolerance level for other
maturity buckets.
17. Currency Risk
The increased capital flows from different nations following
deregulation have contributed to increase in the volume of
transactions
Dealing in different currencies brings opportunities as well as risk
To prevent this banks have been setting up overnight limits and
undertaking active day time trading
Value at Risk approach to be used to measure the risk associated
with forward exposures. Value at Risk estimates probability of
portfolio losses based on the statistical analysis of historical price
trends and volatilities.
18. Interest Rate Risk
Interest Rate risk is the exposure of a bank’s financial conditions to
adverse movements of interest rates which can pose a significant threat
to a bank’s earnings and capital base
Changes in interest rates also affect the underlying value of the
bank’s assets, liabilities and off-balance-sheet item
Interest rate risk refers to volatility in Net Interest Income (NII) or
variations in Net Interest Margin(NIM)
Therefore, an effective risk management process that maintains
interest rate risk within prudent levels is essential to safety and
soundness of the bank.
20. Re-pricing Risk
The assets and liabilities could re-
price at different dates and might be
of different time period. For example,
a loan on the asset side could re-price
at three-monthly intervals whereas
the deposit could be at a fixed
interest rate or a variable rate, but re-
pricing half-yearly
Basis Risk
The assets could be based on
LIBOR rates whereas the
liabilities could be based on
Treasury rates or a Swap
market rate
21. Yield Curve Risk
The changes are not always
parallel but it could be a twist
around a particular tenor and
thereby affecting different
maturities differently
Option Risk
Exercise of options impacts the
financial institutions by giving rise
to premature release of funds that
have to be deployed in unfavourable
market conditions and loss of profit
on account of foreclosure of loans
that earned a good spread.
23. Maturity gap method
THREE OPTIONS:
• A) Rate Sensitive Assets > Rate Sensitive Liabilities=
Positive Gap
• B) Rate Sensitive Assets < Rate Sensitive Liabilities =
Negative Gap
• C) Rate Sensitive Assets = Rate Sensitive Liabilities =
Zero Gap
24. • It basically refers to the average life of the asset or the liability
• It is the weighted average time to maturity of all the preset
values of cash flows
• The larger the value of the duration, the more sensitive is the
price of that asset or liability to changes in interest rates
• As per the above equation, the bank will be immunized from
interest rate risk if the duration gap between assets and the
liabilities is zero.
Duration Analysis
25. Simulation
• Basically simulation models utilize computer power to provide
what if scenarios, for example: What if:
– The absolute level of interest rates shift
– Marketing plans are under-or-over achieved
– Margins achieved in the past are not sustained/improved
– Bad debt and prepayment levels change in different
interest rate scenarios
– There are changes in the funding mix e.g.: an increasing
reliance on short-term funds for balance sheet growth
• This dynamic capability adds value to this method and
improves the quality of information available to the
management
26. Value at Risk
• Refers to the maximum expected loss that a bank can suffer in
market value or income:
– Over a given time horizon,
– Under normal market conditions,
– At a given level or certainty
• It enables the calculation of market risk of a portfolio for
which no historical data exists. VaR serves as Information
Reporting to stakeholders
• It enables one to calculate the net worth of the organization
at any particular point of time so that it is possible to focus on
long-term risk implications of decisions that have already
been taken or that are going to be taken
29. ALCO - Role & Responsibilities
ALCO decision making unit- Responsible for balance sheet planning from risk
return perspective
Monitoring the market risk levels by ensuring adherence to the various risk
limits set by the bank
Articulating the current interest rate view and a view on future direction of
interest rate movements
Deciding the business strategy of the bank, consistent with the interest rate
view, budget and pre-determined risk management objective.
Determining the desired maturity profile and mix of assets and liabilities
Product pricing for both assets and liabilities side
Deciding the funding strategy i.e. source and mix of liabilities or sale of assets
Reviewing implementation of decisions made in the previous meeting