asset liability mgt 1presentation

8/9/2019 Asset Liability Mgt 1presentation

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Meaning of asset and liability

asset A resource with economic value that

an individual, corporation or

country owns or controls with theexpectation that it will provide futurebenet.

liability


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Component of asset andliability

Liabilities Assets

1. Capital

2. Reserve & Surplus

3. Deposits4. Borrowings

5. Oter Liabilities

1. Cas & Balan!es witRB"

2. Bal. #it Ban$s &%one at Call an' Sort(oti!es

3. "nvest)ents

4. A'van!es

5. *i+e' Assets

,. Oter Assets


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Asset management

Liquid assets enable a bank to provide funds tosatisfy increased demand for loans. But banks,which rely solely on asset management,concentrate on adjusting the price and availability

of credit and the level of liquid assets. Asset liquidity, or how salable the bank!s

assets are in terms of both time and cost, is ofprimary importance in asset management.

"o ma#imi$e pro%tability, management mustcarefully weigh the full return on liquid assets &yield

plus liquidity value' against the higher returnassociated with less liquid assets.


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Liability Management

Liquidity needs can be met throughthe discretionary acquisition of fundson the basis of interest rate

competition.

"he alternative costs of availablediscretionary liabilities can be

compared to the opportunity cost ofselling various assets.


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Asset liability management

ALM is an integral part of the nancialmanagement process of any ban.

ALM can be termed as a ris management

techni!ue designed to earn an ade!uatereturn while maintaining a comfortablesurplus of assets beyond liabilities

"t taes into consideration interest rates,

earning power, and degree of willingness totae on debt and hence is also nown as#urplus Management


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Asset Liability Management is the on$goingprocess of formulating, implementing,

monitoring, and revising strategies relatedto assets and liabilities in an attempt toachieve nancial ob%ectives for a given setof ris tolerances and constraints

AL( is the process involving decisionmaking about the composition of assets

and liabilities including o) balance sheetitems of the bank * + and conducting therisk assessment.


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Concept of ALM

ALM is concerned with strategicmanagement of &alance #heet by givingdue weightage to maret riss vi'. Li!uidity

(is, "nterest (ate (is ) Currency (is. ALM function involves planning, directing,

controlling the *ow, level, mix, cost andyield of funds of the ban

ALM builds up Assets and Liabilities of theban based on the concept of +et "nterest"ncome +""- or +et "nterest Margin +"M-.


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Scope of ALM

ALM is a part of overall ris management of a banwhich addresses the following riss

Liquidity Risk: (is arising out of unexpected*uctuation in cash *ows from the assets andliabilities / both in baning and trading boos.

Interest Rate Risk: (is arising out of *uctuationsin the interest rates on assets and liabilities in the

baning boo. Market Risk: (is of price *uctuations due to

maret factors causing changes in the value of thetrading portfolio.


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WHY STUDY A!UT ALM"

0o gain

Competitive advantage

1alue to the organi'ation

0o reduce $ 2!uity (is

$ Li!uidity (is

$ Credit (is $ "nterest (ate (is


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Too#s for ALM Syste$

3ap Analysis

Modied 3ap Analysis

4uration 3ap Analysis 1alue at (is 1a(-

#imulation


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5b%ective of the study

0o study impact of ALM on the protabilityof di6erent ban$groups ris planning.

0o identify the measure techni!ue of ALM7which is commonly implement in bans

0o now how the ban pro%ect their protand growth through ALM

0o now how ALM a6ect the Li!uidity

planning, interest rate ris management. 0o Analysis the linage of ALM to other

areas of ris management


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not at all some very imp8

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techni!ues used byoragani'ation


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Bhich techni!ue is mostly

implement by the ban

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present#y used tec(nique

presently usedtechni!ue


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asset liability mgt 1presentation

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