This document discusses asset-liability management (ALM) in Indian banks. It provides background on the evolution of risk management practices in Indian banks over time in response to deregulation and other changes. It describes various types of risks banks face, such as interest rate risk, liquidity risk, and credit risk. Effective ALM is important for banks to manage these risks and balance risks with profits. The document outlines objectives to study the current status and impact of ALM practices in Indian banks.
This document discusses asset liability management (ALM) in banks. It describes the ALM process, which involves assessing risks, actively managing the asset-liability portfolio to take risks strategically, and aiming to maximize profits. It outlines various risks banks face, such as liquidity risk, interest rate risk, credit risk, and operational risk. It focuses on liquidity risk management, explaining what liquidity risk is, its causes and symptoms, and how banks can measure and manage it. It also discusses interest rate risk measurement techniques like gap analysis, duration analysis, simulation, and value at risk.
1) Asset/liability management (ALM) is the process of making decisions about the composition of a bank's assets and liabilities in order to manage risks and ensure sustainable profits.
2) ALM decisions are typically made by a bank's asset/liability management committee (ALCO) and involve strategic balance sheet management to match assets and liabilities.
3) The goal of ALM is to manage sources and uses of funds with respect to interest rate risk and liquidity risk arising from mismatches between assets and liabilities.
Asset liability management (ALM) aims to match assets and liabilities to control sensitivity to interest rate changes and limit losses. Key concepts discussed include liquidity risk, interest rate risk, gap analysis, duration gap analysis, and the role of the ALCO in managing risks. Liquidity and interest rate risks can arise from mismatches between asset and liability cash flows and interest rate sensitivities. ALM techniques assess risks and seek to balance risks from both sides of the balance sheet.
This document discusses asset liability management (ALM) in banks. It begins with definitions of ALM and describes the objectives of ALM as including efficient capital allocation, product pricing, and profitability and risk management. It outlines the components of an ALM framework including strategic, organizational, operational, and other elements. It also describes the ALM process in banks including data collection, analysis, decision making, and monitoring. Key aspects covered include the ALM committee, models used like gap analysis and duration analysis, the role of ALM under Basel standards, and ALM software options.
Alm in banks by Prabin kumar Parida, MFC, Utkal UniversityPrabin Kumar Parida
The document provides an overview of State Bank of India (SBI), the largest bank in India. It discusses SBI's history, operations, subsidiaries, international presence, management team, vision, mission and values. Some key points:
- SBI is India's largest bank with over 16,000 branches and assets of $388 billion as of 2013.
- It has domestic operations across India as well as an international presence with over 180 overseas offices.
- SBI has five associate banks and several non-banking subsidiaries that provide services like insurance, cards, and investment banking.
- The document outlines SBI's management structure and leadership team.
This document discusses asset liability management (ALM) in banks. It defines ALM as a mechanism to address risks from mismatches between bank assets and liabilities due to liquidity or interest rate changes. The ALM framework focuses on profitability and viability. It aims to match asset and liability maturities across time horizons. The objectives of ALM include managing liquidity risk, interest rate risk, and currency risks to stabilize profits and the bank's financial position. Tools used in ALM include information systems, organizational structure, and processes to identify, measure and manage various risks.
ALM (Asset Liability Management) involves strategic balance sheet management and managing risks stemming from mismatches between assets and liabilities. It aims to manage liquidity risk, interest rate risk, and profitability. The key risks banks face include credit risk, interest rate risk, liquidity risk, and foreign exchange risk. ALM involves analyzing the composition and maturity profiles of assets and liabilities to control volatility in net interest income and ensure sufficient liquidity. Banks use tools like gap analysis and simulation to measure risks and make decisions around portfolio composition.
Asset Liability Management (ALM) is concerned with strategic balance sheet management involving risks caused by changes in interest rates, exchange rates, and liquidity position. ALM aims to match assets and liabilities in terms of maturities and interest rate sensitivities to minimize interest rate risk and liquidity risk. It involves identifying, measuring, monitoring, and controlling risks like interest rate risk, liquidity risk, credit risk, and contingency risk through techniques like gap analysis and duration gap analysis. Effective ALM requires strong organizational framework, information systems, and regular monitoring and reporting to manage risks.
This document discusses asset liability management (ALM) in banks. It describes the ALM process, which involves assessing risks, actively managing the asset-liability portfolio to take risks strategically, and aiming to maximize profits. It outlines various risks banks face, such as liquidity risk, interest rate risk, credit risk, and operational risk. It focuses on liquidity risk management, explaining what liquidity risk is, its causes and symptoms, and how banks can measure and manage it. It also discusses interest rate risk measurement techniques like gap analysis, duration analysis, simulation, and value at risk.
1) Asset/liability management (ALM) is the process of making decisions about the composition of a bank's assets and liabilities in order to manage risks and ensure sustainable profits.
2) ALM decisions are typically made by a bank's asset/liability management committee (ALCO) and involve strategic balance sheet management to match assets and liabilities.
3) The goal of ALM is to manage sources and uses of funds with respect to interest rate risk and liquidity risk arising from mismatches between assets and liabilities.
Asset liability management (ALM) aims to match assets and liabilities to control sensitivity to interest rate changes and limit losses. Key concepts discussed include liquidity risk, interest rate risk, gap analysis, duration gap analysis, and the role of the ALCO in managing risks. Liquidity and interest rate risks can arise from mismatches between asset and liability cash flows and interest rate sensitivities. ALM techniques assess risks and seek to balance risks from both sides of the balance sheet.
This document discusses asset liability management (ALM) in banks. It begins with definitions of ALM and describes the objectives of ALM as including efficient capital allocation, product pricing, and profitability and risk management. It outlines the components of an ALM framework including strategic, organizational, operational, and other elements. It also describes the ALM process in banks including data collection, analysis, decision making, and monitoring. Key aspects covered include the ALM committee, models used like gap analysis and duration analysis, the role of ALM under Basel standards, and ALM software options.
Alm in banks by Prabin kumar Parida, MFC, Utkal UniversityPrabin Kumar Parida
The document provides an overview of State Bank of India (SBI), the largest bank in India. It discusses SBI's history, operations, subsidiaries, international presence, management team, vision, mission and values. Some key points:
- SBI is India's largest bank with over 16,000 branches and assets of $388 billion as of 2013.
- It has domestic operations across India as well as an international presence with over 180 overseas offices.
- SBI has five associate banks and several non-banking subsidiaries that provide services like insurance, cards, and investment banking.
- The document outlines SBI's management structure and leadership team.
This document discusses asset liability management (ALM) in banks. It defines ALM as a mechanism to address risks from mismatches between bank assets and liabilities due to liquidity or interest rate changes. The ALM framework focuses on profitability and viability. It aims to match asset and liability maturities across time horizons. The objectives of ALM include managing liquidity risk, interest rate risk, and currency risks to stabilize profits and the bank's financial position. Tools used in ALM include information systems, organizational structure, and processes to identify, measure and manage various risks.
ALM (Asset Liability Management) involves strategic balance sheet management and managing risks stemming from mismatches between assets and liabilities. It aims to manage liquidity risk, interest rate risk, and profitability. The key risks banks face include credit risk, interest rate risk, liquidity risk, and foreign exchange risk. ALM involves analyzing the composition and maturity profiles of assets and liabilities to control volatility in net interest income and ensure sufficient liquidity. Banks use tools like gap analysis and simulation to measure risks and make decisions around portfolio composition.
Asset Liability Management (ALM) is concerned with strategic balance sheet management involving risks caused by changes in interest rates, exchange rates, and liquidity position. ALM aims to match assets and liabilities in terms of maturities and interest rate sensitivities to minimize interest rate risk and liquidity risk. It involves identifying, measuring, monitoring, and controlling risks like interest rate risk, liquidity risk, credit risk, and contingency risk through techniques like gap analysis and duration gap analysis. Effective ALM requires strong organizational framework, information systems, and regular monitoring and reporting to manage risks.
Alm objective & scope and other related mattersniteshsharmam
This document provides an overview of asset liability management (ALM) objectives and processes. It discusses the evolution of ALM practices in response to deregulation and increased competition. The key objectives of ALM are to manage liquidity risk and interest rate risk through balancing a bank's assets and liabilities. This involves analyzing maturity gaps and interest rate sensitivities across time buckets. Critical roles in the ALM process include the ALCO committee which sets pricing and balance sheet strategies, and ALM support groups which monitor and report on risk profiles. The document also outlines various ALM reports, policies, and regulatory requirements.
Asset liability management (ALM) is a process for managing a bank's assets and liabilities to maintain liquidity and net interest income. It aims to stabilize profits and the bank's financial position over time by managing factors like interest rate risk from differences between rate-sensitive assets and liabilities. Regulators require banks to analyze gaps between asset and liability maturity profiles and interest rate sensitivities to manage these risks. Liquidity risk, from insufficient funds to meet withdrawals, is also a key risk managed under ALM.
Today bankers and other financial service managers have learned to look at their asset and liability portfolios as an integrated whole. This type of coordinated and integrated decision making is known today as asset-liability management (ALM). This thesis is prepared on ‘The Hong Kong and Shanghai Banking Corporation’- HSBC, in Bangladesh. With its symbol of a Hexagon and the illustrative theme ‘The world’s local bank’ –HSBC is known to a lot of countries and territories of the world as a leading financial service institution. Although the history of its operation in our country is relatively new, yet HSBC already commands a great deal of respect and reputation in our banking community.
Every Financial Institute irrespective of its size is generally exposed to market liquidity and interest rate risks in connection with the process of Asset Liability Management. Failure to identify the risks associated with business and failure to take timely measures in giving a sense of direction threatens the very existence of the institution. It is, therefore, important that the strategic decision makers of an organization assume special care with regard to the Balance Sheet Risk management and should ensure that the structure of the institute’s business and the level of Balance Sheet risk it assumes are effectively managed, appropriate policies and procedures are established to control the direction of the organization. The whole exercise is with the objective of limiting these risks against the resources that are available for evaluating and controlling liquidity and interest rate risk.
Asset and liability management - Principles and Practices of BankingVIRUPAKSHA GOUD
This document discusses asset liability management (ALM) in banks. It defines ALM as the process of managing a bank's balance sheet to allow for different interest rate and liquidity scenarios. The key risks addressed by ALM are discussed as interest rate risk, currency risk, and liquidity risk. Tools for ALM include information systems to gather asset and liability data, establishing an ALCO committee to set risk limits and make decisions, and ongoing risk measurement and management processes. Specific techniques covered are the structural liquidity statement, interest rate gap analysis, and risk measurement methods like duration and simulation.
1. The document discusses asset and liability management (ALM) in commercial banks, including the objectives, characteristics, and evolution of ALM systems.
2. It describes the components of an ALM system architecture including modeling, reporting, and decision making processes to manage interest rate risk and liquidity risk.
3. Key aspects of ALM covered include earnings and economic value perspectives, interest rate risk measurement, term structure modeling, and liquidity risk management.
This document discusses various risks faced by banks, including CAMEL risks relating to capital adequacy, asset quality, management, earnings, and liquidity. It also discusses asset liability management (ALM), which involves planning, organizing, and controlling a bank's assets and liabilities to maintain liquidity and net interest income. Other topics covered include liquidity management, types of liquidity risk, interest rate risk management, and sources of interest rate risk.
The document discusses asset liability management (ALM) in banks. It describes the key components of a bank's balance sheet and profit and loss account. It then discusses the evolution of ALM from a focus on asset management to incorporating liability management and interest rate risk management. The document defines ALM and describes the tools used: information systems, organizational structure, and processes. It also outlines the main risks managed under ALM - liquidity risk, currency risk, and interest rate risk - and provides techniques to measure and manage these risks.
This document discusses asset liability management (ALM) in banks. It describes the key components of a bank's balance sheet, including capital, reserves, deposits, borrowings, assets like cash, investments and advances. It then explains liquidity management, maturity mismatch analysis, and strategies to address mismatches in cash inflows and outflows across different time buckets. The goal of ALM is to manage risks from volatility in interest rates and liquidity.
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.
1) Asset-liability management (ALM) is the process of managing a bank's assets and liabilities to minimize risk from interest rates and liquidity.
2) ALM involves measuring and managing risks like liquidity risk, interest rate risk, and currency risk to protect a bank's net interest margin.
3) The key objectives of ALM are liquidity risk management, interest rate risk management, currency risk management, and profit planning.
Liquidity Risk Management: Comparative analysis on Indian and ASEAN bankspeterkapanee
Risk in the banking sector in simple terms means unpredictability, these risks are uncertainties which may result in adverse outcome in relation to planned objective or expectations of the financial institutions. In the financial world, risk can be defined as “any event or possibility of an event which can impair corporate earnings or cash flow over short, medium or long-term horizon” .
Asset and Liability Management in Indian BanksAbhishek Anand
This document provides an overview of asset and liability management in Indian banks. It discusses key concepts like risk management, non-performing assets (NPAs), Reserve Bank of India (RBI) guidelines, the Narasimham Committee recommendations, Basel accords, and the ALM process. The key points are:
1) Banks face risks like liquidity risk, interest rate risk, currency risk, and credit risk that must be managed. RBI provides guidelines on liquidity risk management.
2) NPAs are loans that are overdue by 90 days. Banks must classify and make provisions for NPAs.
3) The Narasimham Committee in the 1990s recommended reforms like stronger banks
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.
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
Asset-liability management (ALM) matches a bank's assets and liabilities to improve profitability by addressing mismatches. ALM involves placing cash inflows and outflows in maturity buckets and addressing positive or negative mismatches. Surplus funds from positive mismatches can be deployed in statutory reserves, new lending, or money market instruments. Banks can also borrow through money markets like call money or repos to address negative mismatches. Effective ALM stabilizes profits, measures risks, and removes mismatches to maximize shareholder returns.
This document appears to be a presentation on bank asset and liability management (ALM). It includes an agenda showing concepts and tools will be discussed on day 1, and instruments and applications on day 2. It then provides context on the current financial environment including low rates, volatility, questioning of sovereign debt sustainability, and bank difficulties. Several case studies on bank plans, job cuts, and central bank activity are presented. Drivers of the financial crisis are explored such as the growth triangle, risk management failures, and how the situation arose. The presentation concludes by discussing where the banking industry may be headed.
The document discusses various approaches to asset and liability management (ALM), with a focus on liquidity risk management. It proposes using multiple metrics to measure liquidity risk, including the loan-to-deposit ratio, 1-week and 1-month liquidity ratios, a cumulative liquidity model, an intercompany lending report, and a liquidity risk factor. These metrics provide different insights into a bank's self-sufficiency, exposure to roll risk, potential stress points, and daily funding needs from both structural and forward-looking perspectives. The document emphasizes examining liquidity risk at the country, legal entity, and group levels with appropriate limits and assumptions.
This study analyzes the business and financial risks of 30 major Indian companies from 6 industries between 2005-2014. It ranks the industries based on their average business, financial, and total risks. Personal care has the highest capital productivity risk while infrastructure has the highest costs structure and liquidity risks. The study finds a significant positive correlation between business and financial risks, conforming to theory. It also finds that combined business and financial risks influence company returns. However, risks do not significantly correlate with operating profits. The personal care industry has the highest risk-return profile while IT has the lowest risk and highest returns.
The document discusses the capital charge for credit risk under Basel 2. It outlines the three pillars of Basel 2 - minimum capital requirements, supervisory review, and market discipline. It then describes the standardized approach and internal ratings-based approach to computing capital charge for credit risk. The standardized approach uses external ratings and risk weights. The internal ratings-based approach has a foundation and advanced option where banks model PD, LGD, and EAD with regulatory oversight.
The document discusses evolving liquidity issues and recent reports on strengthening liquidity standards from various financial institutions. It outlines the FSA's new framework for liquidity risk management including three approaches for intragroup liquidity - self sufficiency, whole firm waiver scheme, and intragroup firm waiver scheme. Key requirements under the approaches and implications for firms are summarized.
Alm objective & scope and other related mattersniteshsharmam
This document provides an overview of asset liability management (ALM) objectives and processes. It discusses the evolution of ALM practices in response to deregulation and increased competition. The key objectives of ALM are to manage liquidity risk and interest rate risk through balancing a bank's assets and liabilities. This involves analyzing maturity gaps and interest rate sensitivities across time buckets. Critical roles in the ALM process include the ALCO committee which sets pricing and balance sheet strategies, and ALM support groups which monitor and report on risk profiles. The document also outlines various ALM reports, policies, and regulatory requirements.
Asset liability management (ALM) is a process for managing a bank's assets and liabilities to maintain liquidity and net interest income. It aims to stabilize profits and the bank's financial position over time by managing factors like interest rate risk from differences between rate-sensitive assets and liabilities. Regulators require banks to analyze gaps between asset and liability maturity profiles and interest rate sensitivities to manage these risks. Liquidity risk, from insufficient funds to meet withdrawals, is also a key risk managed under ALM.
Today bankers and other financial service managers have learned to look at their asset and liability portfolios as an integrated whole. This type of coordinated and integrated decision making is known today as asset-liability management (ALM). This thesis is prepared on ‘The Hong Kong and Shanghai Banking Corporation’- HSBC, in Bangladesh. With its symbol of a Hexagon and the illustrative theme ‘The world’s local bank’ –HSBC is known to a lot of countries and territories of the world as a leading financial service institution. Although the history of its operation in our country is relatively new, yet HSBC already commands a great deal of respect and reputation in our banking community.
Every Financial Institute irrespective of its size is generally exposed to market liquidity and interest rate risks in connection with the process of Asset Liability Management. Failure to identify the risks associated with business and failure to take timely measures in giving a sense of direction threatens the very existence of the institution. It is, therefore, important that the strategic decision makers of an organization assume special care with regard to the Balance Sheet Risk management and should ensure that the structure of the institute’s business and the level of Balance Sheet risk it assumes are effectively managed, appropriate policies and procedures are established to control the direction of the organization. The whole exercise is with the objective of limiting these risks against the resources that are available for evaluating and controlling liquidity and interest rate risk.
Asset and liability management - Principles and Practices of BankingVIRUPAKSHA GOUD
This document discusses asset liability management (ALM) in banks. It defines ALM as the process of managing a bank's balance sheet to allow for different interest rate and liquidity scenarios. The key risks addressed by ALM are discussed as interest rate risk, currency risk, and liquidity risk. Tools for ALM include information systems to gather asset and liability data, establishing an ALCO committee to set risk limits and make decisions, and ongoing risk measurement and management processes. Specific techniques covered are the structural liquidity statement, interest rate gap analysis, and risk measurement methods like duration and simulation.
1. The document discusses asset and liability management (ALM) in commercial banks, including the objectives, characteristics, and evolution of ALM systems.
2. It describes the components of an ALM system architecture including modeling, reporting, and decision making processes to manage interest rate risk and liquidity risk.
3. Key aspects of ALM covered include earnings and economic value perspectives, interest rate risk measurement, term structure modeling, and liquidity risk management.
This document discusses various risks faced by banks, including CAMEL risks relating to capital adequacy, asset quality, management, earnings, and liquidity. It also discusses asset liability management (ALM), which involves planning, organizing, and controlling a bank's assets and liabilities to maintain liquidity and net interest income. Other topics covered include liquidity management, types of liquidity risk, interest rate risk management, and sources of interest rate risk.
The document discusses asset liability management (ALM) in banks. It describes the key components of a bank's balance sheet and profit and loss account. It then discusses the evolution of ALM from a focus on asset management to incorporating liability management and interest rate risk management. The document defines ALM and describes the tools used: information systems, organizational structure, and processes. It also outlines the main risks managed under ALM - liquidity risk, currency risk, and interest rate risk - and provides techniques to measure and manage these risks.
This document discusses asset liability management (ALM) in banks. It describes the key components of a bank's balance sheet, including capital, reserves, deposits, borrowings, assets like cash, investments and advances. It then explains liquidity management, maturity mismatch analysis, and strategies to address mismatches in cash inflows and outflows across different time buckets. The goal of ALM is to manage risks from volatility in interest rates and liquidity.
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.
1) Asset-liability management (ALM) is the process of managing a bank's assets and liabilities to minimize risk from interest rates and liquidity.
2) ALM involves measuring and managing risks like liquidity risk, interest rate risk, and currency risk to protect a bank's net interest margin.
3) The key objectives of ALM are liquidity risk management, interest rate risk management, currency risk management, and profit planning.
Liquidity Risk Management: Comparative analysis on Indian and ASEAN bankspeterkapanee
Risk in the banking sector in simple terms means unpredictability, these risks are uncertainties which may result in adverse outcome in relation to planned objective or expectations of the financial institutions. In the financial world, risk can be defined as “any event or possibility of an event which can impair corporate earnings or cash flow over short, medium or long-term horizon” .
Asset and Liability Management in Indian BanksAbhishek Anand
This document provides an overview of asset and liability management in Indian banks. It discusses key concepts like risk management, non-performing assets (NPAs), Reserve Bank of India (RBI) guidelines, the Narasimham Committee recommendations, Basel accords, and the ALM process. The key points are:
1) Banks face risks like liquidity risk, interest rate risk, currency risk, and credit risk that must be managed. RBI provides guidelines on liquidity risk management.
2) NPAs are loans that are overdue by 90 days. Banks must classify and make provisions for NPAs.
3) The Narasimham Committee in the 1990s recommended reforms like stronger banks
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.
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
Asset-liability management (ALM) matches a bank's assets and liabilities to improve profitability by addressing mismatches. ALM involves placing cash inflows and outflows in maturity buckets and addressing positive or negative mismatches. Surplus funds from positive mismatches can be deployed in statutory reserves, new lending, or money market instruments. Banks can also borrow through money markets like call money or repos to address negative mismatches. Effective ALM stabilizes profits, measures risks, and removes mismatches to maximize shareholder returns.
This document appears to be a presentation on bank asset and liability management (ALM). It includes an agenda showing concepts and tools will be discussed on day 1, and instruments and applications on day 2. It then provides context on the current financial environment including low rates, volatility, questioning of sovereign debt sustainability, and bank difficulties. Several case studies on bank plans, job cuts, and central bank activity are presented. Drivers of the financial crisis are explored such as the growth triangle, risk management failures, and how the situation arose. The presentation concludes by discussing where the banking industry may be headed.
The document discusses various approaches to asset and liability management (ALM), with a focus on liquidity risk management. It proposes using multiple metrics to measure liquidity risk, including the loan-to-deposit ratio, 1-week and 1-month liquidity ratios, a cumulative liquidity model, an intercompany lending report, and a liquidity risk factor. These metrics provide different insights into a bank's self-sufficiency, exposure to roll risk, potential stress points, and daily funding needs from both structural and forward-looking perspectives. The document emphasizes examining liquidity risk at the country, legal entity, and group levels with appropriate limits and assumptions.
This study analyzes the business and financial risks of 30 major Indian companies from 6 industries between 2005-2014. It ranks the industries based on their average business, financial, and total risks. Personal care has the highest capital productivity risk while infrastructure has the highest costs structure and liquidity risks. The study finds a significant positive correlation between business and financial risks, conforming to theory. It also finds that combined business and financial risks influence company returns. However, risks do not significantly correlate with operating profits. The personal care industry has the highest risk-return profile while IT has the lowest risk and highest returns.
The document discusses the capital charge for credit risk under Basel 2. It outlines the three pillars of Basel 2 - minimum capital requirements, supervisory review, and market discipline. It then describes the standardized approach and internal ratings-based approach to computing capital charge for credit risk. The standardized approach uses external ratings and risk weights. The internal ratings-based approach has a foundation and advanced option where banks model PD, LGD, and EAD with regulatory oversight.
The document discusses evolving liquidity issues and recent reports on strengthening liquidity standards from various financial institutions. It outlines the FSA's new framework for liquidity risk management including three approaches for intragroup liquidity - self sufficiency, whole firm waiver scheme, and intragroup firm waiver scheme. Key requirements under the approaches and implications for firms are summarized.
This document discusses asset liability management (ALM) frameworks and concepts. It covers key dimensions of ALM including interest rates, maturities, funding, liquidity, and the relationship between liabilities and assets. It also outlines ALM frameworks including business models, risk analysis, capital and financial models, liquidity models, and simulation. Additional sections provide an ALM cheat sheet and discuss liquidity risk, stress testing, and examples of liquidity crises at Bear Stearns and Lehman Brothers.
The document provides an overview of Basel II, including its background, main elements, and implementation process. It discusses:
- The three pillars of Basel II - minimum capital requirements, supervisory review, and market discipline.
- The different approaches for calculating capital requirements for credit, operational, and market risk. This includes standardized and internal ratings-based approaches.
- The importance of the supervisory review process in Pillar 2 for banks to assess their capital adequacy beyond regulatory minimums.
- The role of enhanced disclosure in Pillar 3 to improve market discipline.
It emphasizes that countries should consider their own banking system's readiness before implementing Basel II and that there is no single approach, with
This document discusses managing credit risk in the new millennium. It covers topics such as:
- Sophisticated risk management techniques and changing bank regulations.
- Refinements to credit scoring models and the development of large credit databases.
- The treatment of credit risk in international capital standards like Basel II.
- Estimates that Basel II may significantly reduce capital requirements for many banks.
- Concerns from regulators like the FDIC that this could weaken the banking system.
- The impact of Basel II on small and medium enterprises, which are expected to face lower capital costs.
The document discusses liquidity risk management. It provides historical context on liquidity issues during the financial crisis. Key points discussed include:
- Traditional measures like balance sheet ratios are outdated and fail to capture risks
- Guidance from 2000 would have mitigated crisis impacts had it been adopted
- The 2010 interagency guidance outlines best practices for liquidity risk management, including governance, strategy, monitoring, contingency planning
- Areas of focus include diversified funding, liquid assets, stress testing, and scenario planning
Basel III and its impact on the Indian banking sector. Basel I, II, and III are international banking accord that set capital requirements for banks to reduce risks. Basel III strengthens bank capital and liquidity rules following the 2008 crisis. For India, Basel III means banks must increase capital, manage liquidity risks better, and improve transparency. This will impact bank profitability, capital raising, and consolidation in the Indian banking system.
(1) Diversified Funding: Problems with Steering Towards Long-Term Stable Funding; (2) Analysing the Best Internal Mechanism for Managing new Liquidity Requirements
Risk management in banks is important as banks are exposed to various risks in the changing Indian economy. The key risks include credit risk, market risk, operational risk, liquidity risk, and interest rate risk. Effective risk management involves identifying, measuring, monitoring, and controlling risks. Banks must have robust policies, strategies, organizational structures, and systems in place to properly manage risks like establishing risk limits, risk grading, and risk mitigation techniques. Proper risk management is essential for the long-term success of banks.
This document summarizes a research study that compares liquidity risk management between conventional and Islamic banks in Pakistan. The study uses data from 12 banks (6 conventional, 6 Islamic) over 2006-2009. It finds that size of bank and networking capital are positively but insignificantly related to liquidity risk in both models. Capital adequacy ratio is positively significant for conventional banks, while return on assets is positively significant for Islamic banks. The results indicate some differences in factors impacting liquidity risk between conventional and Islamic banking models in Pakistan.
liquidity concepts, instruments and procedureSamiksha Chawla
This document provides an overview of liquidity concepts, instruments, and theories of liquidity management for commercial banks. It defines liquidity as the ability to meet cash needs and discusses how banks estimate liquidity needs based on past loan and deposit fluctuations. The main types of liquidity risk are funding risk, asset liquidity risk, and interest rate risk. The document then outlines various instruments banks use to manage liquidity, including liquid assets like cash reserves and securities, as well as liquid liabilities like certificates of deposits and interbank borrowing. Finally, it discusses several theories of liquidity management that have developed over time, such as the commercial loan theory, shiftability theory, and anticipated income theory.
The document provides guidelines for commercial banks to manage key risks including credit, market, liquidity, and operational risk. It outlines the following:
1. Risk management should have clear frameworks with oversight from senior management and boards of directors who establish risk appetite.
2. Risks are identified, measured, monitored, and controlled through defined policies, processes, management information systems, and independent review.
3. Specific areas of various risk types are overseen through dedicated risk management committees, departments and measurement systems to ensure prudent risk exposure levels.
4. Contingency planning and regular review of risk management effectiveness is important.
The document provides an overview of the key components of a bank's balance sheet, including assets and liabilities. It discusses the various line items under assets (such as cash, investments, advances) and liabilities (such as capital, reserves, deposits, borrowings). It also summarizes the components of a bank's profit and loss statement and provides details on liquidity management, asset liability management and interest rate risk management. The document is intended as a presentation on managing a bank's assets, liabilities, liquidity and interest rate risk.
CAIIB Super Notes: Bank Financial Management: Module D: Balance Sheet Managem...PsychoTech Services
This document discusses liquidity management in banks. It defines liquidity as a bank's ability to meet deposit withdrawals and fund loan demands. The key aspects of liquidity management covered include:
1. Measuring and managing liquidity risk using the stock and flow approaches. The flow approach involves constructing a maturity ladder to assess net funding requirements over time horizons.
2. Setting tolerance limits for liquidity risk metrics like loan-to-deposit ratios to ensure adequate liquidity buffer.
3. Developing a liquidity risk management framework involving board oversight, risk measurement processes, and contingency planning for liquidity crises.
4. Managing liquidity in foreign currencies requires decisions around centralized vs decentralized management
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This document summarizes a systematic literature review on the effects of risk management practices (RMPs) on the performance of Islamic banking institutions (IBIs). The review identified 16 themes and 17 sub-themes related to RMPs and IBI performance from analyzing 39 primary studies. Key findings included that IBIs with good risk mitigation practices, strong risk management environments, clear policies and procedures, and effective risk monitoring tended to have better financial performance. The review concluded RMPs are important for IBIs' financial stability and performance, so IBIs must make RMPs a priority.
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Running head: BANKING RISKS 1
BANKING RISKS 4
Bank Risk
Notes from the teacher:
The project is a good start, but for full credit you will need to identify an organization and provide deeper details on that organization. Also, I have a few thoughts as you progress deeper into the weeks:
-Recommend you combined module 1 and 2 together - keep adding each week to the prior. Once you have it threaded together, concentrate on transitions and good visual aspects such as headers and various fonts and mediums.
-Consider using bullets to list several ideas
People risks
There are huge risks that are experienced when a company is dealing with money. People risks associated with a bank are numerous. Banks deal with people including employees, creditors, debtors and others. Employees can be a source of great risks especially when they expose confidential information to the public. The information can be accessed by criminals who can cause a great loss in regards to the company’s information and money. Debtors are people who can result in great risks when they fail to repay their debts together with interests, and this affects the existence of the bank. Creditors affect the bank when they withdraw their money at once to go to other banks or use their money. This situation causes a company to have less amount of money to lend, and this can affect the bank's existence. The managers of a bank can also put a bank in risks by making wrong decisions by doing things that put the bank's existence in jeopardy
Financial risks
There are different types of financial risks that faced by banks. One risk involves the bank paying its creditors. Banks usually use the money of clients who deposit their money in bank accounts to lend to borrowers. Banks create money by charging interest on loans and therefore return their clients’ money and also pays a small percentage of interest. When creditors withdraw their money at one time, the bank lacks money to lend, and this increases the risk to a bank as it can become bankrupt (Fight, 2014).
The other risk is recovering money from debtors. Banks get funds from the interest that they charge for loans and when debtors fail to pay the bank can be in trouble since it needs the money to pay creditors as well as get its operating cash. Errors that are caused by people and machines can be a source of great risks as the bank can lose money.
Operational risks
Operational risks are termed as risks of losses that may result from the processes that are inadequate or that have failed. Additionally, these risks may be attributed to people, external events, and systems. The operational risks that might be associated with the Bank of America may emanate from the installation of new systems of banking that have not ye ...
Study on credit risk management of SBI CochiSreelakshmi_S
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2. The theoretical background section defines terms like credit, risk, market risk, operational risk, and credit risk. It also discusses contributors to credit risk and key elements of credit risk management.
3. The document discusses credit rating and its use in credit decision making. It provides details on the rating tool used by SBI for assessing creditworthiness of borrowers, especially Small and Medium Enterprises.
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This document discusses various types of risks faced by banks, including credit risk, market risk, operational risk, liquidity risk, and reputation risk. It provides definitions of different risk types such as credit risk, concentration risk, and interest rate risk. The document also covers topics like the importance of credit risk management, factors to consider in credit risk analysis, and modern approaches to assessing and managing credit risk in the banking industry.
This document summarizes the risk management framework of ICICI Bank. It discusses the key risks faced by the bank including credit, market, liquidity, operational, compliance and reputation risks. The risk management strategy involves identifying, measuring, monitoring and controlling risks. Oversight of risks is provided by the Board of Directors and associated committees. Policies govern each type of risk and business activities are undertaken within this framework. Independent groups evaluate, monitor and manage risks across the bank.
This document discusses risk management in the banking sector. It identifies four main types of risks that banks face: operational risk, credit risk, market risk, and regulatory risk. For each risk, it provides examples of the specific risks involved. It also discusses how risk management in banks has evolved from a focus on risk reduction to treating risk as an inherent part of the business that must be monitored. Regulatory responses aimed at improving risk management in the financial industry are also summarized.
This document provides a final project report on credit risk management in banks. The report contains 12 chapters that discuss topics such as the importance of credit risk assessment, credit risk modeling, data collection, and model validation. The report finds that banks need sophisticated systems to quantify and manage credit risk across business lines. It evaluates traditional credit risk measurement approaches like expert systems and discusses the need for banks to have strong management information systems and analytical techniques to measure credit risk. The report aims to provide an accurate and comprehensive framework for estimating credit risk to help banks quantify capital needs to support risk-taking activities.
This document discusses risk management in banks. It outlines the three main categories of risks banks face: credit risk, market risk, and operational risk. It then discusses each of these risks in more detail. Credit risk is the potential that a borrower may default on obligations. Market risk relates to changes in market prices. Operational risk involves losses from inadequate internal processes or systems. The document also mentions regulatory risk and environmental risk as other risks banks face. It discusses tools for managing different types of risks and the importance of capital adequacy requirements.
Credit Risk Management and Loan Recovery in Nigerian Deposit Money Banksijtsrd
The quality of loan recovery in Nigerian deposit money banks is presently impaired with the incidence of a large portfolio of non performing loans. The position of the banks to also act as prime movers of economic development and to effectively manage their credit risk, has not been effective the study therefore examined the potency of credit risk management in addressing loan delinquency or high non performing loan of deposit money banks in Nigeria. In view of this, investigation was conducted on the effect of credit risk architecture on loan recovery. Primary data was used for the study and the ordinary least square was used for data analysis and it was concluded that effective credit risk architecture could enhance loan recovery of deposit money banks in Nigeria. Sunny B. Beredugo | Clifford I. Akhuamheokhun | Bassey Ekpo "Credit Risk Management and Loan Recovery in Nigerian Deposit Money Banks" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-2 , February 2021, URL: https://www.ijtsrd.com/papers/ijtsrd38430.pdf Paper Url: https://www.ijtsrd.com/management/accounting-and-finance/38430/credit-risk-management-and-loan-recovery-in-nigerian-deposit-money-banks/sunny-b-beredugo
Similar to Asset liability management-in_the_indian_banks_issues_and_implications (20)
1. ASSET-LIABILITY MANAGEMENT IN THE INDIAN BANKS: ISSUES AND
IMPLICATIONS
* Dr.Manjula Jain
**Dr.Monica.C.Singh
***Amitabh Pandey
Abstract
The development of the banking system is always associated with the
contemporary changes in the economy. The Indian banking industry has
undergone a metamorphosis in the last two decades due to changes in the
political, economic, financial, social, legal and technological environments.
The mind boggling advances in technology and deregulation of financial
markets across the countries created new opportunities, tempting banks to
enter every business that had been thrown open The banks are now moving
towards universal banking concepts, while adding new channels and a series of
innovative product offerings catering to various segments at an attractive
price. This makes it imperative for the banks to adopt sophisticated risk
management techniques and to establish a link between risk exposures and
capital. Effective management of risk has always been the focus area for banks
owing to the increasing sophistication in the product range and services and
the complex channels that deliver them.. The challenge for the banks is to put
in place a risk control system that minimizes the volatility in profit and
engenders risk consciousness across the rank and file of the organization.
Sound risk management will ensure a healthy bottom line for the bank as risk
taken by the bank will be commensurate with return and will be within an
approved risk management policy. As all transactions of the banks revolve around
raising and deploying the funds, Asset-Liability Management (ALM) gains more
significance as an initiative towards the risk management practices by the Indian banks.
The present paper discusses the various risks that arise due to financial intermediation
and by highlighting the need for asset-liability management; it discusses the Gap Model
for risk management.
*Assistant Professor,Department of Management Studies,IFTM,Moradabad
**Visiting faculty,MPIM,Pune
***Senior Lecturer,Management Dept.SMS,Varanasi
2. Introduction
As Alan Greenspan, Chairman of the US Federal Reserve observed, ‘risk taking is a
necessary condition for wealth creation’. Risk arises as a deviation between what happens
and what was expected to happen. Banks are no exception to this phenomenon. As a
result managements have to create efficient systems to identify, measure and control the
risk and asset-liability management (ALM) is just one component of the overall cluster.
The asset-liability management in the Indian banks is still in its nascent stage. With the
freedom obtained through reform process, the Indian banks have reached greater horizons
by exploring new avenues. This freedom has in fact opened the Pandora’s Box for the
Indian banks as they are now exposed to newer and greater risks. The government
ownership of most banks resulted in a carefree attitude towards risk management. This
complacent behavior of banks forced the Reserve Bank to use regulatory tactics to ensure
the implementation of the ALM. Further, even in the absence of a formal asset-liability
management program, the understanding of these concepts is of value to an institution as it
provides a truer picture of the risk/reward trade-off in which the institution is engaged
(Fabozzi & Kanishi, 1991).
Risk manifest itself in many ways and the risks in banking are a result of many diverse
activities, executed from many locations and by numerous people. As a financial
intermediary, banks borrow funds and lend them as a part of their primary activity. These
intermediation activities, of banks expose them to a host of risks The volatility in the
operating environment of banks aggravates the effect of the various risks. Figure 1
depicts various financial risks involved in banking.
3. Financial Risks in Banking
Project
Corporate Bank Sovereign Retail Equity
Finance
Internal Interest Rate
Process – in banking
Credit Risk
and trading
books
People Operational Types of Risks Market
Risk Risk Foreign
Exchange
Information Equity
External Risk
Factors
Commodity
Security and
Systems Risk
Integrity Risk
Fig-1
Based on the origin and their nature, risks are classified into various categories. The most
prominent financial risks to which the banks are exposed to are:
Interest rate risk - Risk that arises when the interest income/ market value of the bank is
sensitive to the interest rate fluctuations.
Foreign Exchange/Currency Risk - Risk that arises due to unanticipated changes in
exchange rates and becomes relevant due to the presence of multi-currency assets and/or
liabilities in the bank's balance sheet.
Liquidity risk - Risk that arises due to the mismatch in the maturity patterns of the assets
and liabilities. This mismatch may lead to a situation where the bank is not in a position
to impart the required liquidity into its system - surplus/ deficit cash situation. In the case
of surplus situation this risk arises due to the interest cost on the ideal funds. Thus idle
funds deployed at low rates contribute to negative returns.
Credit Risk - Risk that arises due to the possibility of a default/delay in the repayment
obligation by the borrowers of funds.
Contingency risk - Risk that arises due to the presence of off-balance sheet items such as
guarantees, letters of credit, underwriting commitments etc. The intermediation activity
of the banks exposes them to various risks not by chance but by choice.
There is also a definite linkage between the various risks faced by banks. For example, if
the bank charges its client a floating rate of interest, in cases of increasing interest rate
4. scenario, the bank's interest rate risk will be lower. Consequently, the payment obligation
of the borrower increases. Other things remaining constant, the default risk increases if
the client is not able to bear the burden of the rising rates. There are many instances
where the interest rate risk eventually leads to credit risk. However, of late, the risk has
increased substantially due to various factors identified below:
Globalization: Reduction of trade barriers and liberal capital movements has made
globalization to stay.
Deregulation: Interest rates and exchange rates have become market determined.
Competition: Competition has multiplied.
Bank Failures – Affecting the financial system
As bank failures are detrimental for the proper functioning of the financial system, world
over they are regulated more closely than any other sector. In this process, the objective
of the guidelines has been changing over the years forcing the banks to move from
reactive risk management practices to proactive risk management practices. Till the
seventies, guidelines of most economies shielded the banks from competitive forces.
Administered interest rates enabled the banks to lock their spreads in a manner to cover
their high operational costs. Regulations of this nature invariably led to market
imperfections, which in turn affected the operational efficiency of the banks. Later,
during 1970s as the economies began to deregulate, with no proper risk management
practices in place, banks had to face the adverse impact of the exposures taken by them.
Spreads narrowed as the volatility in the international interest rates enhanced. In an
attempt to shore up their earnings, banks adopted aggressive strategies. The resultant
mismatches in assets and liabilities and rise in risk levels, led to the bankruptcy of some
banks. Against this background, evolved the concept of Asset-Liability Management as a
risk management tool.
Importance of Risk Management
Risk management does not aim at risk elimination, but enables the banks to bring their
risks to manageable proportions while not severely affecting their income. This balancing
5. act between the risk levels and profits needs to be well-planned. Apart from bringing the
risks to manageable proportions, they should also ensure that one risk does not get
transformed into any other undesirable risk. This transformation takes place due to the
interlinkage present among the various risks. The focal point in managing any risk will be
to understand the nature of the transaction in a way to unbundle the risks it is exposed to.
As all transactions of the banks revolve around raising and deploying the funds, Asset-
Liability Management gains more significance for them. Asset-liability management is
concerned with the strategic management of balance sheet involving the management of
risks caused by changes in the interest rates, exchange rates and the liquidity position of
the bank. While managing these three risks, forms the crux of the ALM, credit risk and
contingency risk also form a part of the ALM. Due to the presence of a host of risks and
due to their interlinkage, the risk management approaches for ALM should always be
multi-dimensional.
To manage the risks collectively, the ALM technique should aim to manage the volume,
mix, maturity, rate sensitivity, quality and liquidity of the assets and liabilities as a whole
so as to attain a predetermined acceptable risk/reward ratio. The purpose of ALM is thus,
to enhance the asset quality, quantify the risks associated with the assets and liabilities
and further manage them. Different risks that banks are exposed to will affect the short-
term profits, the long-term earnings and the long-run sustenance capacity of the bank and
hence the ALM model should primarily aim to stabilize the adverse impact of the risks on
the same. Depending on the primary objective of the model, the appropriate parameter
should be selected. The most common parameters for ALM in banks are:
Net Interest Margin (NIM) - The impact of volatility on the short-term profits is measured
by NIM, which is the ratio of the net interest income to total assets. Hence, if a bank has
to stabilize its short-term profits, it will have to minimize the fluctuations in the NIM.
Market Value of Equity (MVE) - The market value of equity represents the long-term
profits of the bank. The bank will have to minimize adverse movement in this value due
to interest rate fluctuations. The target account will thus be MVE. In the case of unlisted
6. banks, the difference between the market value of assets and liabilities will be the target
account.
Economic Equity Ratio - The ratio of the shareholders funds to the total assets measures
the shifts in the ratio of owned funds to total funds. This in fact assesses the sustenance
capacity of the bank. Stabilizing this account will generally come as a statutory
requirement. While targeting any one parameter, it is essential to observe the impact on
the other parameters also. It is not possible to simultaneously eliminate completely the
volatility in both income and market value. Thus, ALM is a critical exercise of balancing
the risk profile with the long/short term profits as well as its long-run sustenance.
Objectives of the Study
Though Basel Capital Accord and subsequent RBI guidelines have given a structure for
ALM in banks, the Indian Banking system has not enforced the guidelines in total. The
banks have formed ALCO as per the guidelines; but they rarely meet to take decisions.
Public Sector banks are yet to collect 100% of ALM data because of lack of
computerization in all branches. With this background, this research aims to find out the
status of Asset Liability Management in the commercial banks working in India with the
help the available secondary data on the subject matter. The study has following
objectives to explore:
• To define the asset and liabilities in the light of RBI’s Basel-II Norms.
• To study the behavior of Indian Banks in terms of nature and strengths of
relationship between Assets and Liability.
• To find out the component of Assets explaining variance in Liability and vice
versa
• To study the impact of ownership over Asset Liability management in Banks
• To study impact of ALM on the profitability of bank.
The Study
7. Asset Liability Management is a risk management technique and an on-going process of
formulating, implementing, monitoring, and revising strategies related to assets and
liabilities in an attempt to achieve financial objectives for a given set of risk tolerances
and constraints. Thus a general perspective of ALM can be laid out as - ALM is
– A hierarchy (to execute the process)
– A process (to track, report and monitor risk management)
– A tool (to analyze relevant data)
– A technique (to measure risk and suggest alternatives)
– A repository (a versatile data warehouse)
–
ALM initiative in India
Reserve Bank of India has made mandatory for banks with effect from 2002 – 03
To form ALCO (Asset-Liabilities Committee) as a committee of the Board of
Directors
To track, monitor and report ALM
Indian Scenario
While most of the banks in other economies began with strategic planning for asset
liability management as early as 1970, the Indian banks remained unconcerned about the
same. Till eighties, the Indian banks continued to operate in a protected environment. In
fact, the deregulation that began in international markets during the 1970s almost
coincided with the nationalization of banks in India during 1969. Nationalization brought
a structural change in the Indian banking sector. Wholesale banking paved the way for
retail banking and there has been an all-round growth in branch network, deposit
mobilization and credit disbursement. The Indian banks did meet the objectives of
nationalization, as there was overall growth in savings, deposits and advances. But all this
was at the cost of profitability of the banks. Quality was subjugated by quantity, as loan
sanctioning became a mechanical process rather than a serious credit assessment
decision. Political interference has been an additional malady.
8. Paradigm Shift
As the real sector reforms began in 1992, the need was felt to restructure the Indian
banking industry. The reform measures necessitated the deregulation of the financial
sector, particularly the banking sector. The initiation of the financial sector reforms,
brought about a paradigm shift in the banking industry. The Narasimham Committee
report on the banking sector reforms highlighted the weaknesses in the Indian banking
system and suggested reform measures based on the Basle norms. The guidelines that
were issued subsequently laid the foundation for the reformation of Indian banking
sector. The deregulation of interest rates and the scope for diversified product profile
gave the banks greater leeway in their operations. New products and new operating styles
exposed the banks to newer and greater risks. Though the types of risks and their
dimensions grew, there was not much being done by the banks to address the situation.
At this point, the Reserve Bank of India, the chief regulator of the Indian banking
industry, has donned upon itself the responsibility of initiating risk management practices
by banks. Moving in this direction, the RBI announced the prudential norms relating to
Income Recognition, Asset Classification and Provisioning and the Capital Adequacy
norms, for the banks. These guidelines ensured that the Indian banks followed
international standards in risk management. The Prudential norms and the Capital
Adequacy norms are expected to ensure safety and soundness of the banks. On a closer
observation, these norms however, tackle the risks at a macro level. The capital and the
provisions serve as a cushion to the banks and ensure that they sustain in the long run.
But, banks do face risks in their day-to-day transactions, which alter their assets and
liabilities on a continuous basis. The developments that have taken place since
liberalization have further led to a remarkable transition in the risk profile of the financial
intermediaries. The changes in the profile of the sources and uses of funds are reflected in
the borrower's profile, the industry profile and the exposure limits for the same, interest
rate structure for deposits and advances, etc. This not only has led to the introduction of
discriminate pricing policies, but has also highlighted the need to match the maturities of
the assets and liabilities.
9. The main reasons for the growing significance of ALM are volatility in operating
environment, product innovations, regulatory prescriptions, enhanced awareness of top
management, high percentage of the non-performing loans in India attributed to the
stringent asset classification norms, which the Indian banks follow. Asset Liability
Management is strategic balance sheet management of risks caused by changes in the
interest rates, exchange rates and the liquidity position of the bank. To manage these
risks, banks will have to develop suitable models based on its product profile and
operational style. Ironically, many Indian banks are yet not ready to take the required
initiative for this purpose. Though the reasons for such lack of initiative are varied, one
important reason can be that the management of the banks has so far been in a protected
environment with little exposure to the open market. It was lack of technology and
inadequate MIS, which prevented banks from moving towards effective ALM. The
apathy on the part of the banks made it imperative for the RBI to step in and push the
process.
Basel II Accord: Impact On Indian Banks
The New Basel Capital Accord, often referred to as the Basel II Accord or simply Basel
II, was approved by the Basel Committee on Banking Supervision of Bank for
International Settlements in June 2004 and suggests that banks and supervisors
implement it by beginning 2007, providing a transition time of 30 months. It is estimated
that the Accord would be implemented in over 100 countries, including India. Basel II
takes a three-pillar approach to regulatory capital measurement and capital standards –
Pillar 1 (minimum capital requirements): It spells out the capital requirement of a bank
in relation to the credit risk in its portfolio, which is a significant change from the “one
size fits all” approach of Basel I. Pillar 1 allows flexibility to banks and supervisors to
choose from among the Standardized Approach, Internal Ratings Based Approach, and
Securitization Framework methods to calculate the capital requirement for credit risk
exposures. Besides, Pillar 1 sets out the allocation of capital for operational risk and
market risk in the trading books of banks.
10. Pillar 2 (supervisory oversight): It provides a tool to supervisors to keep checks on the
adequacy of capitalization levels of banks and also distinguish among banks on the basis
of their risk management systems and profile of capital. Pillar 2 allows discretion to
supervisors to
(a) link capital to the risk profile of a bank;
(b) take appropriate remedial measures if required; and
(c) Ask banks to maintain capital at a level higher than the regulatory minimum.
Pillar 3 (market discipline and disclosures): It provides a framework for the
improvement of banks’ disclosure standards for financial reporting, risk management,
asset quality, regulatory sanctions, and the like. The pillar also indicates the remedial
measures that regulators can take to keep a check on erring banks and maintain the
integrity of the banking system. Further, Pillar 3 allows banks to maintain confidentiality
over certain information, disclosure of which could impact competitiveness or breach
legal contracts. It provides a framework for the improvement of banks’ disclosure
standards for financial reporting, risk management, asset quality, regulatory sanctions,
and the like.
Approach of the Reserve Bank of India to Basel II Accord
The Reserve Bank of India (RBI) has asked banks to move in the direction of
implementing the Basel II norms, and in the process identify the areas that need
strengthening. In implementing Basel II, the RBI is in favour of gradual convergence
with the new standards and best practices. The aim is to reach the global best standards in
a phased manner, taking a consultative approach rather than a directive one. RBI has also
specified that the migration to Basel II will be effective March 31, 2007 and has
suggested that banks should adopt the new capital adequacy guidelines and parallel run
effective April 1, 2006. Over time, when adequate risk management skills have
developed, some banks may be allowed to migrate to the Internal Ratings Based approach
for credit risk measurement.
11. Standardized approach as suggested by RBI may not significantly alter Credit Risk
measurement for Indian banks
In the Standardized approach proposed by Basel II Accord, credit risk is measured on the
basis of the risk ratings assigned by external credit assessment institutions; primarily
international credit rating agencies like Moody’s Investors Service (refer Table 1). This
approach is different from the one under Basel I in the sense that the earlier norms had a
“one size fits all” approach, i.e. 100% risk weight for all corporate exposures. Thus, the
risk weighted corporate assets measured using the standardized approach of Basel II
would get lower risk weights as compared with 100% risk weights under Basel I. Basel II
gives a free hand to national regulators (in India’s case, the RBI) to specify different risk
weights for retail exposures, in case they think that to be more appropriate. To facilitate a
move towards Basel II, the RBI has also come out with an indicative mapping of
domestic corporate long-term loans and bond credit ratings against corporate ratings by
international agencies like Moody’s Investor Services (refer Table 2).
Going by this mapping, the impact of the lower risk weights assigned to higher rated
corporate would not be significant for the loans & advances portfolio of banks, as these
portfolios mainly have unrated entities, which under the new draft guidelines continue to
have a risk weight of 100%. However, given the investments into higher rated corporate
in the bonds and debentures portfolio, the risk weighted corporate assets measured using
the standardized approach may get marginally lower risk weights as compared with the
100% risk weights assigned under Basel I. For retail exposures—which banks in India are
increasing focusing on for asset growth—RBI has proposed a lower 75% risk weights (in
line with the Basel II norms) against the currently applicable risk weights of 125% and
100% for personal/credit card loans, and other retail loans respectively. For mortgage
loans secured by residential property and occupied by the borrower, Basel II specifies a
risk weight of 35%, which is significantly lower than the RBI’s draft prescription of 75%
(if margins are 25% or more) and 100% (if margins <25%).
Given mortgage loan portfolio collateralized on residential property and the current credit
guidelines of majority of banks giving housing loans with 20% margins, we estimate that
12. the risk weight applicable would be 100%. The risk weights would decline over time to
75% for residential mortgage loans, as the mortgage loan is repaid and (if) the market
price of property appreciates. Most of the banks have a large short-term portfolio in cash
credit, overdraft and working capital demand loans, which are currently unrated, and
carry a risk weight of 100%. Similarly, in the investment portfolio the banks have short-
term investments in commercial papers, which also currently carry 100% risk weight.
The RBI’s draft capital adequacy guidelines also provides for lower risk weights for short
tem exposures, if these are rated on the ICRA’s short term rating scale .ICRA expects the
banks to marginally benefit from these short-term credit risk weight guidelines, given the
small investments in commercial papers (which are typically rated in A1+/A1 category).
The banks can drive maximum benefit from these proposed short-term credit risk
weights, in case they were to get short-term ratings for the short-term exposure such as
cash credit, overdraft and short term working capital demand loans.
An Illustration
A typical bank portfolio has an exposure to retail loans, mortgage loans, personal/credit
card loans, corporate loans, cash credit, working capital demand loans, corporate bonds
and commercial papers. For illustration, we have considered a bank with exposures to
these loans segments and applied the current and new risk weights (under Basel II).
Typically, a bank’s corporate loan portfolio including cash credit and working capital
demand loans has mostly unrated exposures. External ratings are used more in the
investment portfolio, for investing in debentures, bonds, and commercial paper (typically
A1+/A1), lowering the proportion of unrated exposures. Thus, implementation of Basel II
would result in a marginally lower credit risk weights and a marginal release in
13. regulatory
capital needed for credit risk. As a result, we expect for most banks, Basel II would result
in reduction in regulatory credit risk weights. However, if the banks were to significantly
increase their retail exposures or get external ratings for the short-term exposures (cash
credit, overdraft and working capital demand loans), the credit risk weights could decline
significantly.
Operational Risk Capital allocation would be a drag on capital for Indian banks
Basel II has indicated three methodologies for measuring operational risk:
• Basic Indicator Approach;
• Standardized Approach; and
• Advanced Measurement Approach (AMA).
RBI has clarified that banks in India would follow the Basic Indicator Approach to begin
with. Subsequently, only banks that are able to demonstrate better risk management
systems would be asked to migrate to the Standardised Approach and AMA.
Internationally, in the US, as various papers indicate, very few banks would eventually
migrate to AMA, whereas in the EU, regulators have stated that they would make AMA
mandatory for banks under their jurisdiction. The Basic Indicator approach specifies that
banks should hold capital charge for operational risk equal to the average of the 15% of
annual positive gross income over the past three years, excluding any year when the gross
income was negative. Gross income is defined as net interest income and non-interest
income, grossed up for any provisions, unpaid interests and operating expenses (such as
14. fees paid for outsourced services). It should only exclude treasury gains/losses from
banking book and other extraordinary and irregular income (such as income from
insurance). ICRA has estimated the capital that Indian banks would need to meet the
capital charge for operational risk.
In ICRA’s estimates, Indian banks would need additional capital to the extent of Rs. 120
billion to meet the capital charge requirement for operational risk under Basel II. Most of
this capital would be required by the public sector banks (Rs. 90 billion), followed by the
new generation private sector banks (Rs. 11 billion), and the old generation private sector
bank (Rs. 7.5 billion). In ICRA’s view, given the asset growth witnessed in the past and
the expected growth trends, the capital charge requirement for operational risk would
grow 15-20% annually over the next three years, which implies that the banks would
need to raise Rs. 180-200 billion over the medium term.
Impact of providing capital for Operational Risk on the tier-I capital of specific
banks
ICRA has estimated the regulatory capital after providing capital for the operational risk
for the large public and private sector banks, Many of the public sector banks, namely
Punjab National Bank, Bank of India, Bank of Baroda and Dena Bank, besides private
sector banks like UTI Bank have announced plans to raise equity capital in the current
financial year, which would boost their tier I capital.
Thus, implementation of Basel II is likely to improve the risk management systems of
banks as the banks aim for adequate capitalization to meet the underlying credit risks and
strengthen the overall financial system of the country. In India, over the short term,
commercial banks may need to augment their regulatory capitalization levels in order to
comply with Basel II. However, over the long term, they would derive benefits from
improved operational and credit risk management practices.
ALM: The Rising Need
Macro Level:
15. Formulation of critical business policies
Efficient allocation of capital
Designing of products with appropriate pricing strategy
Micro Level:
Profitability through price matching
Liquidity through maturity matching
Objectives of ALM
Business intelligence objectives
– Monitoring of asset-liability portfolio and the tolerance level
– Early alerts on ALM position and risk profile
– Localization of concern areas
– Modern tools to address concern areas
Compliance objectives
– Strategy and direction by asset liability committee (ALCO)
– Returns to be filed with central bank
Strategy
ALM aims at profitability through price matching
Price matching maintains spreads by ensuring that the deployment of liabilities
will be at a rate more than the costs
It ensures liquidity by means of Maturity matching
“Maturity Matching” is done by grouping both assets and liabilities based on their
maturity profiles. It ensures liquidity
Basis of ALM
Traditional system of Accrual Accounting in Banks
The method disguised possible risks arising from how the assets and liabilities
were structured
Example
16. Saral Bank borrows Rs 100 mn for 1 yr @ 6.00% p.a. and lends to Reputation
Ltd. for 5 yrs @ 6.20% p.a.
Gain (seemingly): 20 bps
Risk entailed in transaction: borrow again at the end of 1 yr to finance the loan
which still has 4 more yrs to mature
Interest rate for 4 yrs maturity at the end of 1 yr: 7.00% p.a.
– What happens??
Earn – 6.20% p.a. & Pay – 7.00% p.a.!!
Accrual method of accounting
Asset = 100*(1.062) = Rs 106.2 mn
Liability = 100*(1.060) =Rs 106 mn
Earnings = 106.2 – 106 =Rs 0.2 mn
Market Value method of accounting
Asset = 100*(1.062)^5/ (1.070)^4 = 96.72 mn
Liability = 100*(1.060) = Rs 106 mn
Loss = Rs 9.28 mn
Root cause of problem – Mismatch between Assets & Liabilities
ALM Components
Liability management – involves management policy actions to influence deposits
and non deposits (money market) liabilities of the bank.
It incorporates –
Determining the amount of funds needed.
Obtaining the funds at lowest possible cost with the least risk
exposure.
Asset management – comprises selection of best investment alternatives (loans,
advances, investments, fixed assets) that promise the highest rate of return for the
level of risk that a bank management is prepared to assume.
Finding an appropriate balance between profitability and liquidity consideration
is the main objective.
17. ALM Framework
The framework of ALM revolves round 3 Pillars:
ALM Organization (ALCO) Asset Liability Committee - ALCO is a decision making unit
responsible for balance sheet planning from a risk return perspective including strategic
management of interest and liquidity risk. To ensure commitment of the Top
Management and timely response to market dynamics, the CEO/CMD/President or the
ED should head the Committee.
ALM Information System- It is responsible to collect information accurately, adequately
and expeditiously. ALM has to be supported by a management philosophy that clearly
specifies the risk policies and tolerance limits. The framework needs to be built on sound
methodology with necessary supporting information system, as the central element of the
entire ALM exercise is the availability of adequate and accurate information with
expedience.
ALM Process- The basic ALM process involves risk identification, risk measurement,
risk management risk policies and tolerance levels. The steps involved in ALM are:
• Review interest rate structure
• Compare the same to interest/product pricing of both assets and liabilities
• Examine loan & investment portfolios in the light of foreign exch. risk and
liquidity
• Examine probability of credit and contingency risk
• Review actual performance against projections made.
Techniques to measure ALM Risk
Traditional Method
Gap Analysis (as shown in the figure below)
Sophisticated Techniques
Duration Analysis
Simulation Exercises
Value at risk Method
18. Transaction
Interface
ALM ALM
Model Applicatio
ns
Savin
Liquidity Interest
gs Rate
Bank Gap
Gap
Curren
t
Accoun Duration Cost to
Gap Close
Letters
of Cash
Credit Flows in terms NII Scenar
of sensitivity io
Amount, Analys
Term Cash flow is
Loan Date,
s Currency,
Interest Rate
VaR FTP
Term
Deposit
s
Ratio Reg.
…. Analysis Report
s
Fig-2
……..
Trends ALCO
Support
SLR
Tradin
g .
.
.
19. Gap Analysis -This model looks at reprising gap that exists between the interest revenue
earned on the bank's assets and the interest paid on its liabilities over a particular period of
time (Saunders, 1997). The various steps involved are:
Various assets and liabilities grouped under various time buckets based on
the residual maturity of each item or the next repricing date, if on floating
rate, whichever is earlier.
Then the gap between the assets and liabilities under each time bucket is
worked out.
Assets and liabilities subject to repricing within a year are RSA and RSL
Only rate sensitive assets (RSAs) and Risk Sensitive Liabilities (RSLs) are
considered.
The gap is identified as:
RSA - RSL (rate sensitive assets minus rate sensitive liabilities).
Positive gap occurs when RSA>RSL. If interest rates rise (fall), bank
NIMs or profit will rise (fall). The reverse happens in the case of a
negative gap where RSA<RSL.
Based on this gap position and strategy is worked out to maximize the NII.
The decision to hold a positive gap or a negative will depend on the expectation on the
movement of interest rates.
GAP Change in Interest Change in Interest Change in Interest Change in
Position Rates income expenses NII
Positive Increase Increase Increase Increase
Positive Decrease Decrease Decrease Decrease
Negative Increase Increase Increase Decrease
Negative Decrease Decrease Decrease Increase
Zero Increase Increase Increase None
Zero Decrease Decrease Decrease None
20. Price Matching
Aims to maintain spreads by ensuring that the deployment of liabilities will be at a rate
higher that the costs
(Rs crore)
Table1 Table1 (Rearranged)
Liabilities Assets Liabilities Assets
Amount Rate Amount Rate Amount Rate Amount Rate Spread
15 0 10 0 10 0 10 0 0
25 5 20 12 5 0 5 12 7
30 12 50 15 15 5 15 12 12
30 13 20 18 10 5 10 15 10
30 12 30 15 3
10 13 10 15 2
20 13 20 18 5
100 8.75 100 13.5 100 8.75 100 13.5 4.75
Maturity Matching
Aims at maintaining liquidity by grouping assets/liabilities based on their maturing
profiles. The gap is then assessed to identify future financing requirements
(Rs. Cr.) (Period in months)
Table2 Table 2 (Rearranged)
LiabilitiesMaturing in Assets Maturing in Liabilities Assets Gap Cumul. Gap
10 1 15 <1 10 15 -5 -5
5 3 10 3 5 10 -5 -10
8 6 5 6 8 5 3 -7
4 12 10 12 4 10 -6 -13
45 24 30 24 45 30 15 2
20 36 10 36 20 10 10 12
8 >36 20 >36 8 20 -12 0
100 100 100 100
Maturity Gap Method
To see the effect of rate changes on Net Interest Income (NII)
Rate Sensitive Gap (RSG) = RSA - RSL
Use the gap to maintain/improve the NII:
If RSG is positive : Direct relationship between NII and rate
movement
If RSG is negative : Inverse relationship between NII and rate
movement
21. If RSG is zero – No effect on NII (No speculative gain too)
NII is said to be immunized if RSG = Zero
Impact of change in interest rates on NII:
∆NII = Gap * ∆r
More importantly, identify the target gap for given forecast of rate change:
Gap = (Earning Assets * NIM x ∆c) / ∆r
where,
Earning assets = Total assets of the bank
NIM = Net Interest Margin
∆c = Acceptable change in NIM
∆r = Expected change in interest rates
Limitations
Accuracy level of forecasts
Gap management is a difficult task
Ignores the time value of money
Assumption of same effect on all assets and liabilities
Rate Adjusted Gap Method
The RSAs and RSLs are adjusted by assigning weights based on the estimated
change in the rate for the different assets/liabilities for a given change in interest
rates
Rate Adjusted Gap = Weighted RSA – Weighted RSL
Rest same as Maturity Gap approach
Duration Analysis
Duration is an important measure of the interest rate sensitivity of assets and liabilities as
it takes into account the time of arrival of cash flows and the maturity of assets and
liabilities. It is the weighted average time to maturity of all the preset values of cash
flows. Duration basic -ally refers to the average life of the asset or the liability.
DP /p = D ( dR /1+R)
22. The above equation describes the percentage fall in price of the bond for a given increase
in the required interest rates or yields. 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. Theduration model has one important benefit. It uses the
market value of assets andliabilities.
Value at Risk
Refers to the maximum expected loss that a bank can suffer over a target horizon, given
a certain confidence interval. It enables the calculation of market risk of a portfolio for
which no historical data exists. 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. It is
used extensively for measuring the market risk of a portfolio of assets and/or liabilities.
Other techniques
• Hedging – Use of derivative instruments, especially when there is a maturity
mismatch or when forecasting is difficult
• Sensitivity Analysis – Assessing sensitivities and then regrouping the
assets/liabilities
• Simulation and Game Theory – Forecasting future trends and simulating the
short/medium/long term implications of the same
• Monte Carlo Simulation - Assures the probability of risk statistically. The name is
derived from the casino city in France, where the probability of roulette winning
chances was first computed by this technique.
• Earnings at Risk - Assures the quantum of earnings susceptible to interest rate
fluctuations as against fixed interest rate commitments.
23. A Diagrammatic Representation of ALM as a Risk Management Tool for Central
Bank of India(CBI)
The different ALM and risk management functions that are currently implemented at CBI
include: Risk parameters ,Risk identification ,Risk measurement ,Risk management and
Risk policies and tolerance levels.
Benefits to CBI
Various analysis and strategies can be simulated, both at the branch level and
enterprise-wide, all over the bank
Automated data transfer from the bank's disparate legacy systems to the ALM
application. System controls instituted for data consistency, accuracy and
completeness. Checks with alerts and reminders
Platform independent and scalable. Configuration of new business lines, heads of
accounts or addition of new branches can be done by the bank staff themselves.
Vendor support is not required
Highly modular and parameterized in design, enabling ease of maintenance by the
bank
Extensive reporting capabilities: operational, statistical and user-customized
24. ALM Solution – Pinnacle
ICICI Infotech’s product PINNACLE provides various analytical tools that enable active
asset liability management to ensure they stay balanced over time, maximize profitability,
thus providing prudent capital adequacy.
Facilitates identification of sources of risk and their measurement.
Deals with profitability and growth management.
Offers a variety of powerful, risk evaluation, and analytical utilities that enable
strategic planning and decision-making.
Findings
Implementation of Basel II is likely to improve the risk management systems of banks as
the banks aim for adequate capitalisation to meet the underlying credit risks and
strengthen the overall financial system of the country. In India, over the short term,
commercial banks may need to augment their regulatory capitalisation levels in order to
comply with Basel II. However, over the long term, they would derive benefits from
improved operational and credit risk management practices.
Among all groups, SBI & Associates have best asset- liability maturity pattern.
They have the best correlation between assets and liabilities.
Other than Foreign Banks - all other banks can be called liability managed banks.
They all borrow from money market to meet their maturing liabilities.
Across all banks Fixed Asset and Net Worth are highly correlated.
All banks have proportionate Net worth and investment in Fixed Asset.
Private banks are aggressive in profit generation e Banks have better Net Profit
Margin and. Return on Net worth.
Private Banks have greater equity multiplier than public sector banks, which
reflects extra leverage that they have.
After 2002, public sector banks are catching up with private banks.
25. ALM implementation – problems in banks
Policy: Lack of a coherent, documented and practical policy is a big
hindrance to ALM implementation. Most often, ALCO membership
itself may not be aware of implications of risks being measured and
impact.
Understanding of complexities: Many people in a bank need to
understand risk measurements and risk mitigation procedures.
Measurement of risk is a fairly simple phenomenon and does go on
regardless. Failures inevitably occur due to lack of understanding,
coupled with a feeling that top management knows all that there is in
banking.
Organisation and culture: Risk organization in banks generally land
up reporting to treasury, as they are people who come closest to
understanding complex financial instruments. The fact that they are a
business unit, in charge of ‘risk taking’ is overlooked. ‘Risk Taking’
and ‘Risk management’ are generally two distinct parts of any
organization and both must report to a board completely
independently. Openness and transparency are essential to a proper
risk organization. Most organizations react badly to positions going
wrong by taking more risks and enter a vicious cycle of risks. Thus, it
is required that banks follow policy in both letter and spirit.
26. Data and models: Data may not be available at all times in requisite
format. It must be remembered that many data items are
assumptions and gaps must be measured in perspective. However, in
modern banking, it is mapping of models to zero coupon bonds that
are an issue. Once again, arguments are that this should exist within
the bank. Based on sophistication required, multiple models may be
used to validate this conversion. This is strictly outside ALM
framework but integrates into ALM framework.
Unrealistic goals: A zero gap is not practical. Returns are expected
for taking risks. Banks assume market and credit risk and hence they
make returns. ALCO’s job is to correctly determine positions and put
in place appropriate remedial measures using appropriate risks. It is
not to show things as good when they are not
Suggestions
1. Interest rate risk and liquidity risks are significant risks in a bank’s balance sheet,
which should be regularly monitored and managed. These two aspects should be a
key input in business planning process of a bank.
2. Banks should make sure that increased balance sheet size should not result in
excessive asset liability mismatch resulting in volatility in earnings.
3. There should be proper limit structures, which should be monitored by Asset
Liability Management Committee (ALCO) on a regular basis. Do involve all
ALCO members in decisions. Some functional heads may not be interested. It is
best to have someone as a salesman for ALCO to sell ideas, how important these
ideas are to implement central systems for better benefits for bank.
27. 4. The effectiveness of ALM system should be improved with a good Fund Transfer
Pricing system.
5. Have a younger person, enthusiastic in nature as ALCO secretary. This person is
responsible for all pre-ALCO analysis and distribution of ALM reports to relevant
people.
6. Do not deliberate a lot over non-term product distribution. It is anyway a
probabilistic cash flow. Worry more about systems in place to constantly review
this.
7. ALM sheet item granularity depends on distribution for non-term products. For
example, ‘savings bank’ may be one heading or ‘savings bank – salaries’ could be
the level at which distribution of volatility differs. Thus, discuss these items
beforehand.
8. Define functional objectives completely before starting this project. Do not keep
tampering with it.
9. Senior management may refer to well known books on this subject to get a quick
revision.
10. Do not over-engineer your ALM sheet. Let it evolve.
11. Results of ALM are visible over a couple of years. Keep measuring what is
required.
References
Fabozzi, FJ., & Konishi, A. (1995). Asset-liability management. New Delhi: S
Chand & Co.
Government of India (1998): Report of the Committee on Banking Sector
Reforms (Chairman: M Narasimham).
Harrington, R. (1987). Asset and liability management by banks. Paris: OECD.
Jain, J.L. (1996). Strategic planning for asset liability management. The
Journal of the Indian Institute of Bankers, 67(4).
Jalan, B (2000): ‘Agenda for Banking in the New Millennium’, Reserve Bank
of India Bulletin, March, p(61-64)
28. Kannan, K (1996). Relevance and importance of asset-liability management in
banks. The Journal of the Indian Institute of Bankers, 67(4).
Sastry VN, Akella R K, ALM Architechture for Indian Banks, Treasury
Management, April 2005,p(24-39)
Saunders, A. (1997). Financial institutions management (2nd ed). Chicago: Irwin.
Shah, S. (1998). Indian legal hierarchy. Mumbai: Sudhir Shah Associates
(website).
Sinkey, J.F. (1992). Commercial bank financial management(4th ed). New York:
Maxwell Macmillan International Edition.
RBI, 2003, “Reports on Trends and Progress of Banking in India, 2002-03,”
www.rbi.org.in
The World Bank (1995). The emerging Asian bond market: India. Prepared by
ISec, Mumbai.
Vaidyanathan, R (1995). Debt market in India: Constraints and prospects.
Bangalore: Center for Capital Markets Education and Research, Indian Institute
of Management-Bangalore.
ASSET-LIABILITY MANAGEMENT IN THE INDIAN BANKS:
ISSUES AND IMPLICATIONS
By
Dr.Manjula Jain
Assistant.Professor
Department of Management Studies,
Institute of Foreign Trade and Management,Moradabad
Ph no.+919927041217
29. Email:jainmanjula76@gmail.com
Alternate id:manjuakash@rediffmail.com
Dr .Monica.C.Singh
Visiting faculty
,MPIM,Pune
Ph.no.+919823118793
Email:monica.c.singh@gmail.com
Mr.Amitabh Pandey
Senior lecturer
Management Department
SMS,Varanasi.
Ph.no+919235764359.