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ALM - Coggle Diagram
ALM
Significance
Volatility
Product Innovations & Complexities
Regulatory Enviroment
Management Recognition
Liquidity Management
Definition
Process of generating funds to meet contractual obligations at fit prices at all times
Methods satisfying funding needs
Raise capital funds
Decrease holding of less liquid assets
Increase short-term borrowing
Dispose off liquid assets
Types of Liquidity risk
Funding risk
Replace net outflows <- unanticipated withdrawals/ non-renewal
Call risk
Crystallization of contigent liability
Time risk
Compensate for non-receipt of expect inflow of funds
Structural Liquidity
Place all CFs ( both in &out) in maturity ladder as per residual maturity
Maturing Liability: outflow
Maturing asset :inflow
Classify into 8 maturity types
Mismatches
Can be positive: M.A >M.L
Creating new assets
Can be negative: M.A > M.L
Reduce Mismatch
Increase M.A
Financed from market borrowings
Repo & deploy to convert foreign currency into local currency
Parameter For stablize ALM
( tham số)
Net interest Margin
Econnomic equity ratio
Net interest income
Interest Rate sensitivity
Definition
Generated by grouping RSA, RSL & off-balance sheet
RSA: Money at call/ advances/Investment
RSL: Borrowings/Deposits (exclude:CD)
Interest Rate Management
Exposure to adverse movement of interest rates
Interest Rate risk
Volatility in NII & NIM
Sources
Gap Risk/ Basis Risk/Net interest position risk
Yield curve risk/ price risk/ Reinvestment risk
Measurement
Gap Analysis
Negative gap (RSA<RSL): increase market interest ,decline in NII
Positive gap (RSA>RSL): Decline market interest ,
decline
in NII
Duration Analysis
percentage change in economic value of a position
Definition
process of planning, organizing, controlling of A& L ( volumes/mixes/ maturity/yield/cost)
Purpose: Stablize short-term profits/ long -term earnings/ long-term substance