Asset and Liability Management in Banks

Overview:

Introduction:

Asset and Liability Management (ALM) plays a pivotal role in ensuring the financial stability and profitability of banks. It has evolved significantly due to regulatory advancements, market complexities, and technological innovations. This training program provides a comprehensive understanding of ALM, focusing on its strategic importance, advanced methodologies, and emerging challenges. Through it, participants will gain insights into gap analysis, risk management, and structural hedging while understanding how ALM aligns with regulatory frameworks and long-term financial strategies.

Program Objectives:

By the end of this program, participants will be able to:

• Explore the evolving role of ALM and its impact on banking strategies.

• Conduct detailed asset and liability gap analysis to identify and mitigate risks.

• Optimize portfolio management through advanced Funds Transfer Pricing (FTP) techniques.

• Utilize sophisticated tools for managing FX and interest rate risks.

• Develop structural hedging strategies while addressing future ALM challenges.

Targeted Audience:

• Bank treasurers and ALM professionals.

• Risk managers and compliance officers.

• Financial analysts and portfolio managers.

• Regulatory and policy advisors.

• Banking executives overseeing financial strategy.

Program Outline:

Unit 1:

The Evolving Role of Asset and Liability Management (ALM):

• Defining the role and strategic importance of ALM in modern banking.

• Global Financial Crisis: Causes, resolution, and key takeaways.

• Impact of Basel III on capital adequacy, risk constraint ratios, and leverage ratios.

• Standardized methodologies for credit risk: Adjustments for collateral and gearing.

• Linking ALM optimization to Return on Equity (ROE) and Basel III implications.

Unit 2:

Asset and Liability Gap Analysis:

• Addressing the challenges of maturity transformation in banking portfolios.

• Behavioral modeling techniques for prepayment and redemption adjustments.

• Managing non-traded market risks: IRRBB vs. CSRBB and their measurement.

• Liquidity risk under Basel III: Understanding LCR, NSFR, and strategic implications.

• Beyond Pillar I: ICAAP, ILAAP, and Recovery and Resolution Planning (RRP).

Unit 3:

Evolution of FTP and Non-Wholesale Portfolio Management:

• Fundamentals of FTP and its role in optimizing banking portfolios.

• Evolution of FTP methodologies and deriving accurate FTP curves.

• Behavioralizing portfolios through FTP to align incentives and drive business behavior.

• Optimizing tools and products: Pricing, regulatory integration, and FTP trends.

• Governance and ownership of FTP, including effective reporting and alignment strategies.

Unit 4:

Tools for Managing FX and Interest Rate Risk:

• Applications of cash FX instruments in risk mitigation.

• Types, pricing, and valuation of Interest Rate Swaps (IRS).

• Cross Currency Swaps (XCCY): Applications in managing FX and IR risks.

• Leveraging FX swaps for optimized funding solutions.

• Long-term FX risk management through XCCY swaps: Pricing and valuation.

Unit 5:

Structural Hedging and Future Challenges for ALM:

• Structural hedging: Governance, scope, and implementation.

• Managing the costs of unwinding structural hedges.

• Preparing for future ALM challenges: TLAC/MREL requirements and Basel IV.

• Strategic responses to emerging regulatory and market dynamics.