Strategic Asset & Liability (ALM) Management

Post the global financial crisis, optimal Asset and Liability Management within a bank is more challenging than ever. The regulation that followed the crisis, in particular Basel III, has meant that optimization of assets and liabilities are vital in mitigating the ‘hit’ on Return on Equity that the regulation represents.

This intensive workshop looks to explore what, within the industry, is considered best practice of an ALM function and moreover via real life case studies and excel based simulations explain how the function looks to optimize balance sheet performance via the more selective deployment of balance sheet resources. In addition, it will explore the fluid regulatory landscape in which ALM is functioning and outline what the industry considers as best practice in terms of dealing with the challenges that landscape presents.

Hence by attending this workshop, delegates will be better equipped to work in or with the ALM function and support the optimization of the balance sheet they are tasked to achieve.

Learning outcomes:

• Define the role of ALCO and ALM and explain the impact of market/regulatory challenges on the bank’s balance sheet in and appreciate how the industry is looking to mitigate this impact
• Appreciate the impact of IFRS9 impairment charges on balance sheets and how banks are looking to potentially mitigate
• Understand the criticality of effective time bucketing of cash flows from both contractual maturing and on maturing assets and liabilities and the risks highlighted from it (liquidity, funding and interest rate risks)
• Assess Interest Rate Risk in the Banking Book both through the lens of impact on earnings and impact on equity, in line with BIS 368 Standards/prescribed shocks, how to integrate this into Pillar II ICAAP and the required Pillar III reporting for it
• Derive and apply maturity Funds Transfer Pricing [FTP] curves, adjust for regulatory impact on liquidity and capital and have awareness of the ongoing evolution of FTP methodologies in the industry and in particular the challenges presented by an illiquid wholesale market
• Better grow and optimise deposit portfolios via greater awareness of what is considered best practice in terms of portfolio interrogation and the provision of tools and products
• Model the behaviour of Non-Maturing Deposits [NMD’s] and articulate best practice for doing so
• Identify ways in which the wider business can support the ALM function in dealing with these challenges via, for example, communication and alignment of business incentivisation

Day 1:

• Session 1: Linking Asset and Liability Optimisation to Return on Equity
• Session 2: Linking Accounting and Prudential Regulation – Impact of IFRS9
• Session 3: Asset and Liability Gap Analysis Part I
• Session 4: Asset and Liability Gap Analysis Part II – Maximum Cumulative Outflows [MCO’s]

Day 2:

• Session 1: Overview of IRRBB
• Session 2: Measuring Earnings at Risk [EaR]
• Session 3: Measuring change in Economic Value of Equity [EVE]
• Session 4: Going beyond Parallel Shocks

Day 3:

• Session 1: Defining and Deriving the FTP Curve
• Session 2: Operating FTP
• Session 3: Pricing with FTP
• Session 4: Case Study – FTP in illiquid markets

Day 4:

• Session 1: Evaluating worth of funds
• Session 2: Focus on modelling behaviour of NMD’s
• Session 3: Focus on ‘solutioneering’ - products and strategies to support optimisation
• Session 4: Driving behaviours and wrap up