Asset & Liability Management

Course Introduction

This Oxford Management Centre Asset Liability Management (ALM) training course will teach participants how to
manage a bank’s balance sheet in a prudent manner. It will identify the key risks to which banks are
exposed and show how these risks can be kept within a bank’s risk appetite. Banks will always be
exposed to the risks that arise from their maturity intermediation function. This course will equip
participants with the knowledge necessary to understand how these risks arise and the skills
required to manage them.

While people are conscious that credit losses such as those which triggered the 2008 global financial
crisis can trigger bank failure, they are less aware that banks holding credit risk-free assets are also
prone to collapse. The collapse of Silicon Valley Bank has highlighted once again that banks can
collapse when they pursue inappropriate asset liability management strategies. 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 conscious of the
bank’s financial position.

This Asset & Liability Management training course highlights:

• Understand the unique nature of banks
• Assess the stability of a bank’s funding sources
• Measure the interest rate sensitivity of bank assets and liabilities
• Implement hedging policies to manage interest rate risk in the banking book
• Develop contingency funding plans to address the risks of a bank run

Objectives

At the end of this Asset & Liability Management training course, you will have learned to
• Measure the stability of deposits
• Assess the risk to a bank’s net interest margin (NIM)
• Implement a funds transfer pricing (FTP) policy
• Develop a hedging strategy for a bank’s strategic investment portfolio
• Devise an internal liquidity adequacy assessment process (ILAAP)

Training Methodology

The course will be highly interactive building on the experience of course participants. ALM concepts
will be clearly explained and their practical implementation will be highlighted. Participants are
encouraged to share the ALM challenges which their organisation faces and these will be explored.
Excel models will be developed to demonstrate how ALM risks materialise and how these risks can
be measured and mitigated. Case studies will be used to show ALM issues in practice.

Organisational Impact

Employees attending this Asset & Liability Management training course will be better able to manage the bank’s ALM challenges:
• Understand ALM risks
• Assess the stability of the bank’s funding
• Develop strategies to target appropriate funding sources
• Implement hedging strategies to contain interest rate exposures within the bank’s risk appetite
• Engage with the bank’s regulators and address their concerns
• Devise bank ALM policy

Personal Impact

This Asset & Liability Management training course is intended to transform participants’ ability to contribute to the ALM process in a bank:
• Appreciate the risks attaching to maturity intermediation
• Measure the behavioural maturity of bank assets and liabilities
• Understand the effect of a deposit guarantee on depositor behaviour
• Measure the sensitivity of assets and liabilities to interest rate movements
• Contribute to the development of a bank’s ILAAP and contingency funding plan (CFP)
• Present to the asset liability committee (ALCO) on ALM strategy

Who Should Attend?

The current, more volatile interest rate environment presents ever greater risk to bank profitability. Knowing how to deal with this demands an understanding of the tools of ALM.

This Asset & Liability Management training course is suitable to a wide range of professionals but will greatly benefit:
• Bank Treasury and Finance Staff
• Bank Risk Management and Compliance Staff
• Central Bankers in Charge of Bank Supervision
• Bank Auditors
• Consultants and Lawyers

Course Outline

Day 1

Introduction to ALM

Day 2

Market Risk in Banking

Day 3

Interest Rate Risk in the Banking Book (IRRBB