Bank Asset-Liability Management

Agenda Program Online
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Prague, NH Hotel Prague
Hybrid Training
Both classroom and online training available
Price for online training
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Key points / questions answered:

Why do banks manage their balance sheets?
How to model and project a bank’s balance sheet?
What are the key equilibrium and the major threats?
How to classify and handle balance sheet risks?
Are the regulatory and the economic views coherent?
What is expected from ALM managers?
What can we learn from passed crises?
What are the current issues?
What are the principles and mechanisms of Asset Liability Management in banks?

The purpose of this seminar is to train banking professionals into the principles and mechanisms of a proper ALM. Mismanagement of their ALM has been the main cause of half of the bank’s defaults in the last 20 years. This training has been conceived to help attendees identify and avoid the traps that led to such dramatic consequences, and to make sure their ALM is the source of added value it is meant to be. During this seminar, we address all ALM issues in a structured way: Modelling the bank’s balance sheet, projecting it into the future, looking at the structural risks that can generate adverse deviations, and learn how to manage them. The concepts presented are illustrated by business cases and games to facilitate their assimilation.

On day 1, we position the ALM within the Bank, we define the resources and we look at the organization it requires: What is the ALM ecosystem? How the ALCO, its Steering Committee, works? What are the various ALM teams and their roles? We discover the main financial instruments, the balance sheet and its major risks: Interest rate, liquidity and currency risks. We learn how to transfer these risks from the businesses to the ALM using appropriate mechanisms and funds transfer pricing.

Day 2 focuses on the techniques used for valuing assets and liabilities and measuring balance sheet risks. In order to value financial instruments, we learn how to generate their expected future cash flows under various conditions. We discover how aggregating these cash flows and assessing possible future cash shortfalls form the basis for measuring balance sheet risks. We also look at applicable regulations (LCR, NSFR, IRRBB…) and put them in perspective with the economic reality. Issues related to options and credit risk (IFRS 9) are also addressed.

Day 3 addresses the management issues related to the ALM and how to deal with operational concerns such as risk control and containment. Key questions are addressed: What risks should be taken? Up to what level? How to hedge risks? How does ALM relate to risk management and to risk budgeting and risk appetite? What is expected from ALM teams and how do they interact with other functions in the bank? Finally, we look at the current matters of concern to the ALM community, such as the macro prudential policy, low interest rates, the resolution fund and new technologies.

We finish the seminar with a series of exercises/games aimed at rehearsing all the major elements learned during these three days: The position and role of the ALM, assets valuation principles, balance sheet risks identification, measurement and management, applicable regulations, and finally current concerns.

Program of the seminar: Bank Asset-Liability Management

The seminar timetable follows Central European Time (CET).

09.00 - 09.15 Welcome and Introduction

09.15 - 12.15 The ALM in the Bank

A Global View of the Bank

  • The role and the organization of the Bank
    • Businesses and business support
    • Finance and Risk
  • The bank's balance sheet
    • Static view
    • Dynamic view
  • What functions needs to be centralized?
    • Functions with effects of scale
    • Functions with compensation effects


  • Nature and role
  • Responsibilities and Components
  • The ALCO

Risks Identification and Cartography

  • From Nuclear Events to Financial Risks
    • The RICAP process
  • Risk Cartography
    • What business models generate what risks?
  • Interest rate, FX, Equity and Liquidity risks

12.15 - 13.15 Lunch

13.15 - 16.30 Balance Sheet Risks Framework

Funds Transfer Pricing

  • Commercial and Financial Margins
    • Policies for setting the margins
    • Articulation with the global interest margin of the bank
  • Reference Refinancing
    • Setting up the right commercial incentives
    • The benefits of reference refinancing

The Regulatory Environment

  • The Regulatory Approach
    • Basel 1, 2 and 3
  • The new EU banking package

Case Study: Dexia

09.00 - 09.15 Recap

09.15 - 12.15 Assets Valuation

Valuation Principles

  • Economic view
  • Regulatory view
  • Accounting view
  • Financial Instruments categorization
  • Generating cash flows
    • Cash flows projection for various loan types
    • Embedded and other options

Regulatory Modelling

  • Exposure to Balance Sheet risks
    • Interest Rate and Liquidity Gaps
    • Behavioral Modelling Principles
  • Regulatory calculations done by the ALM

12.15 - 13.15 Lunch

13.15 - 16.30 Balance Sheet Risks Measurement

Balance Sheet Risks

  • Measuring the Interest Rate Risk of The Banking Book
    • From gaps to interest rate curves modelling
    • Sensitivity and duration, embedded options, prepayments
  • Measuring Spread and Funding Risks
    • Articulating liquidity, spread and funding risks
    • Accounting considerations
  • Assessing Liquidity
    • Liquidity gap and ratios, LCR and NSFR
    • Liquidity reserves management
  • Case study: Credit National

Other risks and how they relate to the ALM

  • ALM and Credit Risk
    • IFRS 9
  • ALM and the Non-Financial risks
    • Operational, business and residual risks
  • Aggregating Risks

End of Day: Review and Games

09.00 - 09.15 Recap

09.15 - 12.15 Balance Sheet Risks Management

Controlling Risks, Hedging and Mitigation

  • Tools for Risk Control and Mitigation
    • Limits, securitization and hedging
  • Hedging
    • Interest rate and other derivatives
    • Value and cash flow hedges
    • Micro and macro hedges
  • Case Study: LTCM

Operational Concerns

  • New production modelling
  • Managing correlations between products
  • IT And Data Concerns
    • Categories of IT tools used to manage balance sheet risks
    • Emerging technologies, machine learning, intelligent reporting

12.15 - 13.15 Lunch

13.15 - 16.30 Perspectives on ALM

Economic Value Management

  • The management mechanisms of the bank
    • Top to bottom: Capital allocation and global limits
    • Bottom-up: Budget and Pricing
  • Articulating Risk and Value
    • Economic Capital
    • Measuring Added-Value
  • The Convergence of Risk and ALM Operating Models
    • Different objectives, different cultures, different silos
    • IFRS 9 breaks the silos

Current Issues

  • Macro-prudential policy
  • Sovereign and Systemic Risks
  • Low interest rate
  • Latest issues and the future of ALM

Seminar Wrap Up and Final Game

Training catalogue in PDF
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