Banking institutions, which actively manage their risks, have a decisive competitive advantage. Asset Liability Management (ALM) is a major component of the overall risk management of an institution and typically focuses on financial risks. A working definition of ALM, “Asset-Liability Management is the ongoing 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.” It covers the set of techniques used to manage interest rate and liquidity risks. It deals with the structure of the Balance Sheet subject to the given constraints - internal, external and regulatory. ALM policies are intended to keep liquidity and interest rate risks at an acceptable level given expectation of future interest rates. Liquidity and interest rate policies are interdependent since any projected liquidity gap will be funded at an unknown rate.
The course would provide understanding of Measurement and Management of Liquidity. Interest rate risk & Choosing assets and liabilities, which result in the highest expected return on equity. The measurement of Economic Capital in the Banking Book which is one of the important aspects of the Pillar II of the New Revised Basel Framework will be addressed as Part of the Interest Risk Management. Background
In the evolving financial environment, Banks & Financial Services Industries (BFSI) are exposed to different types of risks. The management of risk has become very important matter of concern for efficient use of Capital across business lines and, also for strengthening the soundness and stability of the banking system and efficient use of Capital across business lines. The building blocks for management of risks are broadly divided into:
· Risk Identification · Risk Measurement · Risk Pricing · Risk Monitoring and control · Risk Mitigation The implementation of Basel II accord to provide capital cushion against the unexpected losses is the major challenge for the Banks.
In this context, this course has been designed to address the concerned issues with the purpose of providing increasing knowledge and capacity to the BFSI sectors in order to estimate, mitigate and manage the risks. This course covers an in-depth analysis of capital computation for Credit, Market and Operational Risk. It also provides critical inputs for estimation of Economic Capital (EC) for credit risk and Risk Based Pricing (RBP) which is the ultimate goal of managing the risk. In this context, we analyse how the better managemenr ao Asset and liability of the Banks leads to the soundness and tability in the Baking Sector in Particular and Financial Sector in General.
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