Alm in banks

Risk Management Asset Liability Management

Pre-Financial Sector Reforms (1991) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

Banking Reforms 1993 onwards ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

Banking Sector Reforms ……. ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

ALM - Introduction Com Bkg 2008 ALM 2008 Economic Factors Banks Economic Policies

Risks ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

Liquidity Risk Profile of a Bank (Rs in crores) Com Bkg 2008 ALM 2008

International Initiatives in Managing Risks ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

Risk Management ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

WHAT IS ALM? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

Com Bkg 2008 ALM 2008 Asset Liability Management How Liquid are the assets of the Bank How easily can the Bank generate loans from market Asset Management Liability Management

Asset Liability Management ,[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

Asset Liability Management ,[object Object],[object Object],Com Bkg 2008 ALM 2008

ALM and NIM ,[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

GAP Analysis ,[object Object],Com Bkg 2008 ALM 2008

HISTORY OF ALM ,[object Object],Com Bkg 2008 ALM 2008 Interest Rate Risk Deregulation of Interest Rates Liquidity Risk Credit Risk

Definition of ALM ,[object Object],[object Object],Com Bkg 2008 ALM 2008

Com Bkg 2008 ALM 2008 SUCCESS OF ALM PROCESS ,[object Object],[object Object],[object Object],[object Object]

1. ALM INFORMATION SYSTEM ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

2. ALM ORGANISATION ,[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

Com Bkg 2008 ALM 2008 Finance Planning Department Asset Liability Committee (ALCO) Board of Directors Management Committee Asset Liability Management Cell Credit Analysis Department Credit Risk Management Department Treasury Investment and Loan Departments

3. ALM PROCESS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

Com Bkg 2008 ALM 2008 Price Matching (Rs. cr.) * Average cost/return on liabilities/assets . Table 1 Table 1 (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 12 30 12 50 15 15 5 15 12 7 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*

Com Bkg 2008 ALM 2008 Maturity Matching (Rs. cr.) (period in months) Table II Table II (Rearranged) Liabilities Maturing within (months) Assets Maturing within (months) Liabilities Assets Gap Cumulative 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

Risks in ALM ,[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

MANAGEMENT OF LIQUIDITY RISK ,[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

MANAGEMENT OF LIQUIDITY RISK Com Bkg 2008 ALM 2008 Construction of time buckets: 1 to 30/31 days Over 1 month and upto 2 months Over 2 months and upto 3 months Over 3 months and upto 6 months Over 6 months and upto 1 year Over 1 year and upto 3 years Over 3 years and upto 5 years Over 5 years

MANAGEMENT OF LIQUIDITY RISK ,[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

MANAGEMENT OF Interest Rate Risk ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

1. GAP ANALYSIS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

Com Bkg 2008 ALM 2008 1. Strategic Framework 2. Organizational Framework 3. Operational Framework 4. Analytical Framework 5. Technology Framework 6. Information Reporting Framework 7. Performance Measurement Framework 8. Regulatory Compliance Framework 9. Control Framework ASSET AND LIABILITY MANAGEMENT

Regulatory Environment – Risk Management Guidelines in India ,[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

Risk Regulation in India ,[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

RBI revised guidelines 2007-08 ,[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

RBI Revised ALM ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Com Bkg 2008 ALM 2008

Alm in banks

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