An Intensive 5-day Training Course

Asset Liability Management

Course Introduction

The collapse of Silicon Valley Bank (SVB) highlighted once again that banks can collapse even when holding credit risk-free assets. Credit losses such as those which triggered the 2008 global financial crisis are not the only losses that can bring down a bank. Unless a bank manages its assets in conjunction with its liabilities, it can leave itself exposed to a bank run. Mark-to-market losses on unhedged fixed income portfolios become realised losses if these losses trigger withdrawals, forcing asset sales, as depositors lose confidence in the bank. Uninsured deposits magnify the risk of withdrawal since the holders of those deposits are especially aware of the bank’s financial position and the need to withdraw their deposits before a run occurs.

Bankers under the age of 50 have grown up in an environment in which interest rates have only ever gone one way – down! They now need also to learn the skills to live in a world where rates can go up, and stay up, for extended periods of time. They need to understand that interest rate risk in the banking book (IRRBB) needs to be managed as much as credit and liquidity risks. Erosion of net interest margin (NIM) can cause a bank to fail just as credit losses have triggered bank failures in the past.

This Asset Liability Management training course will examine how banks should manage their assets and liabilities to ensure they do not inadvertently find themselves exposed to the risks which brought SVB down. It will show how these risks arise and what strategies a bank needs to pursue to keep these risks within acceptable agreed limits. It will examine the stability of a bank’s funding base and assess what assets it can acquire in view of this stability. It will show, in particular, how a bank can manage the interest rate risk inherent in its non-maturity deposits and capital.

Banks will always be exposed to risks that arise from their maturity intermediation function. This Asset Liability Management training course will equip participants with the knowledge to understand how these risks arise and the skills necessary to manage them.


  • Describe the role of the Asset Liability Management function within a bank
  • Examine the regulations governing Asset Liability Management issues
  • Develop strategies to manage Asset Liability Management risks
  • Understand how the Asset Liability Management function can contribute to maximising the bank’s return on equity while operating within the bank’s risk appetite

Course Outline

Day 1

Introduction to Banking

  • The unique nature of banking
  • The structure of a bank balance sheet
  • The manner in which banks generate income
  • The risks to which banks are exposed
  • The regulations imposed on banks
  • Net interest margin
  • The yield curve
  • Discounted cash flow
  • The various forms of regulatory capital and funding: CET1, Tier 1, Tier 2, MREL
  • Requirements for capital: credit risk, market risk, operational risk, interest rate risk
  • Regulatory capital requirements: Pillar 1, Pillar 2 and ICAAP
  • Measuring bank performance: return on risk-adjusted capital (RORAC), economic value added (EVA)

Day 2

Funding the Bank

  • The nature of bank assets and liabilities
  • Cash flow mismatch
  • The optionality embedded in bank balance sheets
  • The behavioural maturity of bank liabilities
  • Deposit guarantees
  • Liquidity regulations
  • Loan-to-deposit ratio
  • Regulatory requirements: Liquidity coverage ratio (LCR), net stable funding ratio (NSFR)
  • Funds transfer pricing
  • Liquidity stress test
  • Contingency funding plan 2

Day 3

Market Risk in Banking

  • Accrual accounting vs mark-to-market accounting
  • Trading book vs banking book
  • Fair value hierarchy
  • Interest rate swaps, FRAs, cross-currency swaps
  • Marking to market
  • Valuation adjustments: CVA, DVA, FVA
  • Price sensitivity of assets and liabilities
  • Measures of price sensitivity: modified duration, basis point value
  • Measuring market risk of portfolios: value-at-risk (VaR) and expected shortfall
  • Optionality measures and convexity
  • Capital for market risk-taking
  • Using derivatives to manage market risks
  • Counterparty credit risk
  • Clearing, collateral and margining

Day 4

Interest Rate Risk in the Banking Book (IRRBB)

  • Risks to net interest margin
  • Gap analysis
  • Sources of risk: fixed, floating and administered rate products
  • Treatment of equity, non-maturity balances and free funds
  • Structural hedging
  • Types of risk: yield curve risk, customer optionality
  • Pipeline and prepayment risk
  • Non-performing loans
  • Risk management: repricing gaps, derivatives
  • Behaviour of non-maturity deposits
  • Income measures of interest rate risk
  • Economic value measures of interest rate risk
  • Economic value of equity (EVE) vs Earnings at risk (EAR)
  • What to hedge, when to hedge, how much to hedge
  • Trade-off between income and economic value
  • The link between liquidity risk and interest rate risk
  • Basel III IRRBB regulations (Apr/16)
  • EBA IRRBB guidelines (Jul/18)
  • PRA rules and guidance (Dec/21) 3

Day 5

The ALM Process

  • The Asset Liability Committee (ALCO)
  • ALCO roles and responsibilities
  • Setting risk appetite
  • Developing contingency funding plan
  • Designing stress tests
  • Implementing the structural hedge


Oxford Management Centre Certificate will be provided to delegates who successfully completed the training course.

In association with

GLOMACS Training & Consultancy

GLOMACS Training & Consultancy

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5 Days
Choose the date and location that suits you:
Classroom Sessions
01-05 Jul 2024
Fee: $5,950
Book your place
11-15 Nov 2024
Fee: $5,950
Book your place



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