Asset and Liability Management

3 DAY SEMINAR

(Seminar is not being offered at this time)

Introduction

The key to successfully managing a bank’s balance sheet is the need to manage financial exposure due to currency, interest rate and liquidity risks. This seminar is designed as an introduction to the management of a bank’s assets and liabilities.

Key features include:

• the explanation of fundamental asset and liability management principles
• identification of the key Asset and liability risk management issues
• description of market instruments and techniques
• identification of key financial control issues
• the measurement and control of ALM risks and opportunities

Objectives

The seminar is designed to enable the delegate to:

• establish an effective asset and liability management ALM policy
• establish an ALCO with focussed aims and objectives
• effectively manage the ALM function
• understand the tools commonly used in interest rate risk management
• understand derivatives products and their role in ALM
• understand Value at Risk (VaR) measurement concepts, applications and resulting reports
• understand current regulatory requirements and particularly Basel II and how this relates to ALM “Interest rate risk in the banking book”
• understand how other risks impacts capitalisation and effective management  

Who should attend this seminar?

This course is intended those either new to asset and liability management or who wish to further their understanding of managing a bank’s assets and liabilities. It will be of use to:

• investment professionals
• treasury professionals
• balance sheet and capital managers
• asset and liability managers and analysts
• risk managers and portfolio managers
• treasury middle office and operations personnel
• liquidity funding managers
• treasury auditors
• financial controllers, accountants and analysts
• investment bankers
• regulatory and compliance personnel.

Pre-requisites:

Delegates do not need to have prior experience of Asset and Liability management. However it is assumed that all delegates are familiar with common financial terms and have a basic understanding of banking and the functions of a financial institution.  This course is not suitable for those who already have a deep understanding of the issues covered.

Delegates are advised to come equipped with a financial calculator.

Content

Day 1 – Foundations and understanding of asset and liability management

1. Defining and setting asset and liability (ALM) policies and procedures

• Basel II and ALM definition
  • Interest rate risk in the banking book
  • NII – Net Interest Income

• ALM aims and objectives
• ALM processes and management recognition
• ALM and regulatory concerns
• Asset and Liability Committee (ALCO)

2. Managing Assets and Liabilities in current market conditions

• Credit and liquidity issues
• Financial markets volatility
• Financial instruments
• The regulatory environment

3. ALM risk management

• Interest rate risk management
• Foreign exchange risk management
• Liquidity risk management
• Credit risk management
• Trading/operational risks

Day 2 – Techniques of Interest rate risk management

4. Understanding and measuring risks

• Gap management

§  Tools and management methods

§  Behavioural vs. contractual outcomes

• Free funds
• Variance analysis
• Duration and convexity
• Matching & immunisation
• Correlation

5. Financial derivatives: their role in interest rate risk management

•  Financial futures Vs Forward rate agreements (FRAs)
•  Interest rate options
•  Interest rate swaps

6. Short term instruments and their uses

• CP, CD’s, Bills, Cash & T-Bills

7. Interest Rate Risk Strategies

• Active management
• Passive management
• Rate anticipation

Day 3 – Capital allocation and performance measurement

8. Liquidity Management

• Liquidity management models
• Liquidity and volatility

9. Integrating ALM and strategy

•  Role of derivatives
•  Portfolio rebalancing
•  Risk immunisation

10. Transfer Pricing and Performance Measurement

• Transfer pricing as a bank management tool
• ALM implications

11. Value At Risk (VaR)

• Rationale
• Application
• Methods and reports

o    Stress testing, scenario analysis and back testing

12. Capital Allocation

• Risk-based capital standards
• Risk Adjusted Return on Capital (RAROC)
• How funding informs and drives product and pricing implications