asset & liability management in banks

ASSET AND LIABILITY MANAGEMENT IN BANKS

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CHAPTER 1

INTRODUCTION

Indian banking industry is going through a transformation process in its

transitional journey from the era of protected economy to the tough world of

market economy. Banks are expanding their operations, entering new market

and trading in new asset types. The change in financial products, system and

structures have created new opportunities along with new risks.

Risk management has become an internal part of financial activities of banks

and other market participants. These risks cannot be ignored and either have to

be managed by market participants as part of Asset-Liability Management

(ALM) or hedged. Under these circumstances, creating an environment that

promotes risk management assumes critical importance. This requires

addressing certain policy and institutional issues in developing a market for

risk-sharing and risk-diversification in India.

First and foremost, a well-developed market, repo market constitutes an

important prerequisite for the promotion of risk management practices among

market participant. Regulatory gaps and overlaps in debt markets need to be

sorted out quickly to facilitate the repeal of the 1969 notification which has

banned forward trading securities, which will go a long way in aiding the

process of ALM for banks, Indian conditions are suitable for the introduction of

asset-liability based derivatives.

There is vast scope for assets based securitisation in India. There is also scope

for assets based securitisation in India. There is also scope for the introduction

of credit default swaps in India. It offers advantages of hedging credit risk

without impairing the relationship with the borrower. Forward rate agreements


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and interest rate swaps enable users to lock into spreads. The RBI has already

permitted interest rate swaps. A major reason for lack of term money market is

the absence of the practice of ALM system along bank for identifying

mismatches in various time periods.

The recent guidelines on ALM are expected to contribute to the evolution of an

ALM system, which would help banks to take decisions to lend on a term and

also offer two way quotes in the market. The Advisory Group on Banking

Supervision (2001) constituted by RBI recommended greater orientation of the

bank`s management and their Boards towards a better understanding of risks

and their management.

OECD principles of Corporate Governance (2004) recognised the risk

management as an area of increasing importance for Boards, which is closely

related to corporate strategy.


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CHAPTER 2

ASSET-LIABILITY MANAGEMENT (ALM)

In a regulated economy, the interest spread is primarily a function of central

bank of the country because banks accept deposits of regulated rate and lend at

the regulated rate and earn the stipulated spread.

In a globalised environment, intense competition for business and increasing

fluctuations in both domestic interest rates as well as foreign exchange rate put

pressure on the management of banks to maintain spreads profitability and long-

term viability without increasing market risk.

There are two major types of risks that commercial banks are exposed to in the

course of their operation i.e. credit risk and market risk.


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Banking business itself is a credit risk. Market risk arising out of fluctuations in

interest rates, foreign exchange rates, equity price risk and commodity price risk

is virtually not existent in such a regime where market rates and prices are

stable for relatively long periods of time. Banks are exposed to market risk in

market drive and liberalised environment. Therefore, banks have to manage not

only credit risk but also market risk. They require a managerial approach to

control the viability of market risk.

Thus, Asset Liability Management is a strategic response of banks to

inflationary pressures, volatility in interest rates and severe recessionary trends

in the global economy. The commercial banks in India began to face

tremendous problems of Asset-liability mismatch leading to deregulation of

interest rate and free play of market forces, entry of new players, emergence of

new instruments and new products at competitive rates and enhancement of

risks.

The banks witnessed the vulnerability of mismatches during 1995-96. The

banks which funded term assets through short term loans with low interest rates

were caught napping when the call money rates increased to 80% to 90% or

even higher, with growing tendency of greater integration of money market

foreign exchange market and capital market and greater volatility in the market

condition with the emergence of an active debt-market.

Indian commercial banks were under pressure to adopt the new approach of

asset-liability management. Therefore, asset-liability management has

recognised in India as a strategic approach of making business decision in more

comprehensive and disciplined framework to control asset-liabilities mismatch

with an eye on the risks that the banks are exposed to.


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OBJECTIVES OF ASSET LIABILITY MANAGEMENT

According to Dynamic Business Analyst, (2011) a vital issue in strategic bank

planning is asset and liability management, which is the assessment and

management of endogenous-financial, operational, business and exogenous

risks.

The objective of ALM is to maximize profit through efficient fund allocation

given an acceptable risk structure. ALM is a multidimensional process,

requiring simultaneous interactions among different dimensions. If the

simultaneous nature of loan management is discarded the decreasing risk in one

dimension may result in unexpected increases in other risks.

ALM has changed significantly in the past two decades with the growth and

integration of financial institutions and the emergence of new financial products

services which has influenced the target profit of most industries in Ghana. New

information-based activities and financial innovation increased types of

endogenous and exogenous risks as well as the correlation between these.

Consequently, the structure of balance sheet instruments has become more

complex and the volatility in the banking system has increased. These

developments necessitate the use of quantitative skills to manage risks more

objectively and improve performance.

Diversity in financial institution decision makers ‟attitudes toward risk results

in diverse credit management strategies to sustain target or maximized profit.

Risk taker decision makers are willing to accept higher risk for higher returns

whereas risk-averse managers accept lower level of risks for lower return.

Consequences of high risk taking strategies might be more devastating in

unstable macroeconomic environments such as emerging financial markets. On

the other hand, financial risks may also increase a firm`s overall risk.


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CONCEPT OF ASSET-LIABILITY MANAGEMENT

ALM is a comprehensive and dynamic framework for measuring, monitoring

and managing the market risk of a bank. It is the management of structure of

balance sheet (liabilities and assets) in such a way that the net earnings from

interest is maximized within the overall risk-preference (present and future) of

the institutions. The ALM functions extend to liquidly risk management,

management of market risk, trading risk management, funding and capital

planning and profit planning and growth projection.

The concept of ALM is of recent origin in India. It has been introduced in

Indian Banking industry w.e.f. 1st April, 1999. ALM is concerned with risk

management and provides a comprehensive and dynamic framework for

measuring, monitoring and managing liquidity, interest rate, foreign exchange

and equity and commodity price risks of a bank that needs to be closely

integrated with the banks’ business strategy.

Asset-liability management basically refers to the process by which an

institution manages its balance sheet in order to allow for alternative interest

rate and liquidity scenarios. Asset liability management is an integrated

strategic managerial approach of managing total balance sheet dynamics having

regard to its size and quality in such a way that the net earnings from interest are

maximised with the overall risk preference of the bank.

It is concerned with management of net interest margin to ensure that its level

and riskiness are compatible with the risk-return objectives of the bank. This is

done by matching of liabilities and assets in terms of maturity, cost and yield

rates. The maturity mismatches and disproportionate changes in the level of

assets and liabilities can cause both liquidity and interest rate risk. ALM is more

than just managing asset-liability items of the bank`s Balance Sheet.


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However, it is an integrated approach to financial management requiring

simultaneously decisions about types of amounts of financial assets and

liabilities so as to insulated the spread from moving in opposite direction. ALM

is closely integrated with the bank`s business strategy as it has bearing upon the

interest risk profile of the bank.

The focus of ALM is not on building up of deposits and loans in isolation but on

net income and recognising interest rate and liquidity risks. Thus, ALM is

essentials a guide for survival of a bank in a deregulated environment.


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NEED OF ALM IN BANKS

Before 1970 in the industrial countries banks were heavily regulated. They

followed 3-6-3 banking.

3-6-3 banking: Accepting deposits at 3%, lending at 6% and leave for

golf club at 3pm.

Due to high regulations and controls, at that time credit risk was the only aspect

management had to manage. But after 1970 due to deregulation of interest rates

market risks were came in to picture (especially interest rate risk).

Factors which caused changes in banking scenario:

Financial products starting from simple forward contracts to highly

complex instruments came into existence to transfer risk.

Invention of powerful machines to store and process data. The incredible

capacity of these machines raised analysis of information to very high

planes in tern leading to development of new products.

Deregulation of interest rates, technology changes provides both

opportunities and threats.

Banking business has been transformed from mere deposit taking and lending

into a complex world of innovations and risk management.

With the liberalization in Indian financial markets and growing integration of

domestic markets with external markets, the risk associated with banks

operations have become complex and large, requiring strategic management.

Banks are now operating in a fairly deregulated environment and are required to

determine on their own interest rates on deposits and advances in both domestic

and foreign currencies on a dynamic basis.

The interest rates on banks investments in government and other securities are

also now market related. Intense competition for business involving both the


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assets and liabilities together with increasing volatility in domestic interest rates

as well as foreign exchange rates has bought pressure on management of banks

to maintain a good balance among spreads, profitability and long term viability.

Imprudent liquidity management can puts banks earnings and reputation at great

risk. These pressures called for structured and comprehensive measures and not

just add hoc actions.

Banks need to address these risks in a structured manner by upgrading their risk

management and adopting more comprehensive ALM practices than that has

been done hitherto. ALM is concerned with risk management and provides a

comprehensive and dynamic framework for measuring, monitoring and

managing liquidity, interest rate, foreign exchange and commodity price risks of

a bank that needs to be closely integrated with the business strategy. ALM

involves assessment of various types of risks and altering the asset-liability

portfolio in a dynamic way in order to manage risk.


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CHAPTER 3

FUNCTION OF ALM

The basic function of ALM is to guide the management in establishing optimal

match between the assets and liabilities of the bank in such a way as to

maximise its net income and minimise the market risk. This is to be done by

analysing the current market risk profile of the bank and its impact on the future

risk profile. The manager has to choose the best course of action depending on

the risk preferences of the management.

Asset Management : The asset management includes the following:

i. Cash Management : Cash management is a dynamic function that needs

to be dealt with effectively at various levels. Cash balances are the idle

assets of the bank; hence cash should be kept at a bare minimum level.

The banks need to manage their cash balances in order to meet their

customer requirements of their demand deposits.

ii. Reserve and Investment Management : Reserve requirements

constitute the first charge on any bank`s funds and the balance can be

used for advances and other income generating assts. The reduction in

statutory liquidity ratio helps the banks to invest more resources in

profitable avenues. The banks should plan their requirements properly.

iii. Credit Management : A major portion of bank`s income is derived from

returns on advances and credit expansion. Managing credit is a critical


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function of any bank. Effective credit management is necessary to ensure

that the advances remain performing and the income is maximised.

iv. Management of Other Assets : The banks have to invest in other assets

in order to generate more income and not to keep idle assets. It can invest

in real estate, government securities, money market etc. However, the

creation of other assets should generate additional income to the bank.

Liability Management : The liability management includes the

following:

i. Owned Funds : The bank`s owned funds are capital and reserve and

surplus. Capital is raised by offering equity to the public. It can also be

achieved through increasing reserves. Capital adequacy has to be

maintained by the banks. It is considered as a financial barometer for the

stability and soundness of a bank.

ii. Deposits : A major source of asset creation of a bank is mobilisation of

deposits. It has become a challenging task for banks in these days. Banks

collect funds through different types of deposits having different

maturities. There are some demand deposits also. The banks have to see

that these deposits are repaid on time.

iii. Borrowings : Whenever there is a shortage of funds, banks can borrow

from RBI, financial institutions, and markets. It is also a major source of

raising funds. However, the banks have to consider the rate of interest,

maturity and other statutory requirements, while borrowing from outside.


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iv. Floating Funds : The banks have floating funds with them in the form of

bills payables, draft payables. These funds are available for short and

temporary period. These funds have no costs. However, proper

management of these funds requires network of branches, speed in

delivery of service and technological advancement.


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CHAPTER 4

CATEGORIES OF RISK

Risk in a way can be defined as the chance or the probability of loss or damage.

In the case of banks, these include credit risk, capital risk, market risk, interest

rate risk, and liquidity risk. These categories of financial risk require focus,

since financial institutions like banks do have complexities and rapid changes in

their operating environments.

CREDIT RISK: The risk of counter party failure in meeting the payment

obligation on the specific date is known as credit risk. Credit risk

management is an important challenge for financial institutions and

failure on this front may lead to failure of banks. The recent failure of

many Japanese banks and failure of savings and loan associations in the


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CHAPTER 4

CATEGORIES OF RISK












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CHAPTER 4

CATEGORIES OF RISK












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1980s in the USA are important examples, which provide lessons for

others. It may be noted that the willingness to pay, which is measured by

the character of the counter party, and the ability to pay need not

necessarily go together.

The other important issue is contract enforcement in countries like India.

Legal reforms are very critical in order to have timely contract

enforcement. Delays and loopholes in the legal system significantly affect

the ability of the lender to enforce the contract.

CAPITAL RISK: One of the sound aspects of the banking practice is the

maintenance of adequate capital on a continuous basis. There are attempts

to bring in global norms in this field in order to bring in commonality and

standardization in international practices. Capital adequacy also focuses

on the weighted average risk of lending and to that extent, banks are in a

position to realign their portfolios between more risky and less risky

assets.

MARKET RISK: Market risk is related to the financial condition, which

results from adverse movement in market prices. This will be more

pronounced when financial information has to be provided on a marked-

to-market basis since significant fluctuations in asset holdings could

adversely affect the balance sheet of banks. In the Indian context, the

problem is accentuated because many financial institutions acquire bonds

and hold it till maturity. When there is a significant increase in the term

structure of interest rates, or violent fluctuations in the rate structure, one

finds substantial erosion of the value of the securities held.

INTEREST RATE RISK: Interest rate risk is the risk where changes in

market interest rates might adversely affect a bank’s financial condition.


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The immediate impact of changes in interest rates is on the Net Interest

Income (NII). A long term impact of changing interest rates is on the

bank‘s net worth since the economic value of a bank‘s assets, liabilities

and off-balance sheet positions get affected due to variation in market

interest rates. The interest rate risk when viewed from these two

perspectives is known as earnings perspective and economic value‘

perspective, respectively.

As specified, changes in market interest rates have dual impact for a

bank: on its Net Interest Income (NII) and on its net-worth. Management

of interest rate risk aims at capturing the risks arising from the maturity

and re-pricing mismatches and is measured both from the earnings and

economic value perspective.

Earnings perspective involves analyzing the impact of changes in interest

rates on accrual or reported earnings in the near term. This is measured by

measuring the changes in the Net Interest Income (NII) or Net Interest

Margin (NIM) i.e. the difference between the total interest income and

the total interest expenditure.

Economic Value perspective involves analyzing the changes of impact of

interest on the expected cash flows on assets minus the expected cash

flows on liabilities plus the net cash flows on off-balance sheet items. It

focuses on the risk to net-worth arising from all re-pricing mismatches

and other interest rate sensitive positions. The economic value

perspective identifies risk arising from long-term interest rate gaps.

LIQUIDITY RISK: Liquidity risk is the potential inability to meet the

bank’s liabilities as they become due.

It arises when the banks are unable to generate cash to cope with a

decline in deposits or increase in assets. It originates from the mismatches


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in the maturity pattern of assets and liabilities. The liquidity risk in banks

manifest in different dimensions:

Funding Risk: The need to replace net outflows due to unanticipated

withdrawal/non-renewal of deposits

Time Risk: The need to compensate for non-receipt of expected inflows

of funds i.e., performing assets turning into NPAs

Call Risk: Due to crystallization of contingent liabilities and inability to

undertake profitable business opportunities when desirable.

FOREIGN EXCHANGE RISK : The risk that a bank may suffer losses

as a result of adverse exchange rate movements during a period in which

it has an open position, either spot or forward, or a combination of the

two, in an individual foreign currency.


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CHAPTER 5

ELEMENTS OF ALM IN BANK

There are nine elements related to ALM and they are as follows:

Strategic framework: The Board of Directors are responsible for setting

the limits for risk at global as well as domestic levels. They have to decide

how much risk they are willing to take in quantifiable terms. Also it is

necessary to determine who is in chare of controlling risk in the

organization and their responsibilities.

Organizational framework: All elements of the organization like the

ALM Committee, sub–committees, etc., should have clearly defined roles

and responsibilities. ALM activities should be supported by the top

management with proper resource allocation and personnel committee.

Operational framework: There should be a proper direction for risk

management with detailed guidelines on all aspects of ALM. The policy

statement should be well articulated providing a clear direction for ALM

function.

Analytical framework: Analytical methods in ALM require consistency,

which includes periodic review of the models used to measure risk to

avoid miscalculation and verifying their accuracy. Various analytical

components like Gap, Duration, Stimulation and Value-at-Risk should be

used to obtain appropriate insights.


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Technology framework: An integrated technological framework is

required to ensure all potential risks are captured and measured on a

timely basis. It would be worthwhile to ensure that automatic information

feeds into the ALM systems and he latest software is utilized to enable

management perform extensive analysis, planning and measurement of all

facets of the ALM function.

Information reporting framework: The information – reporting

framework decides who receives information, how timely, how often and

in how much detail and whether the amount and type of information

received is appropriate and necessary for the recipient’s task.

Performance reporting framework: The performance of the traders and

business units can easily be measured using valid risk measurement

measures. The performance measurement considers approaches and ways

to adjust performance measurement for the risks taken. The profitability of

an institution comes from three sources: Asset, Liabilities and their

efficient management.

Regulatory compliance framework: The objective of regulatory

compliance element is to ensure that there is compliance with the

requirements, expectations and guidelines for risk – based capital and

liquidity ratios.

Control framework: The control framework covers the control over all

processes and systems. The emphasis should be on setting up a system of

checks and balances to ensure the integrity of data, analysis and reporting.

This can be ensured through regular internal / external reviews of the

function.


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CHAPTER 6

ALM-PROCESS

The ALM process rests on three pillars:

ALM Information Systems

i. Management Information Systems

ii. Information availability, accuracy, adequacy and expediency

ALM Organization

i. Structure and responsibilities

ii. Level of top management involvement

ALM Process

i. Risk parameters

ii. Risk identification

iii. Risk measurement

iv. Risk management

v. Risk policies and tolerance levels

As per RBI guidelines, commercial banks are to distribute the outflows/inflows

in different residual maturity period known as time buckets. The Assets and

Liabilities were earlier divided into 8 maturity buckets.

(1-14 days; 15-28 days; 29-90 days; 91-180 days; 181-365 days, 1-3 years and

3-5 years and above 5 years), based on the remaining period to their maturity

(also called residual maturity).

All the liability figures are outflows while the asset figures are inflows. In

September, 2007, having regard to the international practices, the level of

sophistication of banks in India, the need for a sharper assessment of the

efficacy of liquidity management and with a view to providing a stimulus for


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development of the term-money market, RBI revised these guidelines and it was

provided that

(a) The banks may adopt a more granular approach to measurement of liquidity

risk by splitting the first time bucket (1-14 days at present) in the Statement of

Structural Liquidity into three time buckets viz., next day, 2-7 days and 8-14

days. Thus, now we have 10 time buckets. After such an exercise, each bucket

of assets is matched with the corresponding bucket of the liability. When in a

particular maturity bucket, the amount of maturing liabilities or assets does not

match, such position is called a mismatch position, which creates liquidity

surplus or liquidity crunch position and depending upon the interest rate

movement, such situation may turn out to be risky for the bank. Banks are

required to monitor such mismatches and take appropriate steps so that bank is

not exposed to risks due to the interest rate movements during that period.

(b) The net cumulative negative mismatches during the Next day, 2-7 days, 8-14

days and 15-28 days buckets should not exceed 5 %, 10%, 15 % and 20 % of

the cumulative cash outflows in the respective time buckets in order to

recognize the cumulative impact on liquidity. The Board’s of the Banks have

been entrusted with the overall responsibility for the management of risks and is

required to decide the risk management policy and set limits for liquidity,

interest rate, and foreign exchange and equity price risks.

Asset-Liability Committee (ALCO) is the top most committee to oversee the

implementation of ALM system and it is to be headed by CMD or ED. ALCO

considers product pricing for deposits and advances, the desired maturity profile

of the incremental assets and liabilities in addition to monitoring the risk levels

of the bank. It will have to articulate current interest rates view of the bank and

base its decisions for future business strategy on this view.


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CHAPTER 7

CLASSIFICATION OF ALM IN BANKS

(Referred from Asset - Liability Management System in banks – Guidelines by

RBI)

OUTFLOWS:

Capital

Reserves and surplus

Deposits

i. Current deposits

ii. Savings bank deposits

iii. Term deposits

iv. Certificates of deposits

Borrowings

i. Call and short notice

ii. Interbank(term)

iii. Refinances

iv. Others

Other liabilities and provisions

i. Bills payable

ii. Inter office adjustments

iii. Provisions for depreciation and unrecoverable loans etc

iv. Others

Lines of credit committed to


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i. Institutions

ii. Customers

Letters of credit/ guarantees (contingent liabilities)

Repos

Bills rediscounted

Swaps (buy/sell) /maturing forwards

Interest payable

Others- if any

INFLOWS:

Cash

Balances with RBI—for CRR

Balances with other banks

i. Current account

ii. Money at call and short notice, term deposits etc

Investments

i. Approved securities

ii. Corporate debentures and bonds, CDs, redeemable preference shares,

units of mutual funds

iii. Investments in subsidiaries/ joint ventures

Advances (performing)

i. Bills Purchased and Discounted (including bills under DUPN)

ii. Cash Credit/Overdraft (including TOD) and Demand Loan component

of Working Capital.


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iii. Term Loans

NPAs

i. Sub-standard

ii. Doubtful and Loss

Fixed Assets

Other Assets

i. Inter-office Adjustment

ii. Others

Reverse repo

Interest receivable

Swaps (sell/buy)/ maturing forwards

Committed lines of credit

Bills rediscounted(DUPN)

Others


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TIME BUCKETS

RBI was divided future cash flows into different time buckets. While preparing

structural liquidity statement and interest rate sensitivity statement cash flows

were placed in different time buckets based on their maturity period or repricing

period.

i) 1 to 14 days

ii) 15 to 28 days

iii) 29 days and upto 3 months

iv) Over 3 months and upto 6 months

v) Over 6 months and upto 12 months

vi) Over 1 year and upto 2 years

vii) Over 2 years and upto 5 years

viii) Over 5 years

The first time bucket (1-14 days at present) is further divided into three time

buckets for more granular approach to measurement of risk.

i. Next day

ii. 2-7 days

iii. 8-14 days


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RISK MEASUREMENT TECHNIQUES

There are various techniques for measuring exposure of banks to interest rate

risks:

GAP ANALYSIS MODEL

Measures the direction and extent of asset-liability mismatch through either

funding or maturity gap. It is computed for assets and liabilities of differing

maturities and is calculated for a set time horizon. This model looks at the

repricing gap that exists between the interest revenue earned 9n the bank's assets

and the interest paid on its liabilities over a particular period of time (Saunders,

1997).

It highlights the net interest income exposure of the bank, to changes in interest

rates in different maturity buckets. Repricing gaps are calculated for assets and

liabilities of differing maturities. A positive gap indicates that assets get

repriced before liabilities, whereas, a negative gap indicates that liabilities get

repriced before assets. The bank looks at the rate sensitivity (the time the bank

manager will have to wait in order to change the posted rates on any asset or

liability) of each asset and liability on the balance sheet. The general formula

that is used is as follows:

NIIi = R i (GAPi)

While NII is the net interest income, R refers to the interest rates impacting

assets and liabilities in the relevant maturity bucket and GAP refers to the

differences between the book value of the rate sensitive assets and the rate

sensitive liabilities. Thus when there is a change in the interest rate, one can

easily identify the impact of the change on the net interest income of the bank.

The various items of rate sensitive assets and liabilities and off-balance sheet

items are classified into time buckets such as 1-28 days, 29 days and upto 3


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months etc. and items non sensitive to interest based on the probable date for

change in interest.

The gap is the difference between Rate Sensitive Assets (RSA) and Rate

Sensitive

Liabilities (RSL) in various time buckets. The positive gap indicates that it has

more RSAS than RSLS whereas the negative gap indicates that it has more

RSLS. The gap reports indicate whether the institution is in a position to benefit

from rising interest rates by having a Positive Gap (RSA > RSL) or whether it is

a position to benefit from declining interest rate by a negative Gap (RSL >

RSA).

The immediate focus of ALM is interest-rate risk and return as measured by a

bank’s net interest margin

NIM = (Interest income – Interest expense) / Earning assets

A bank’s NIM, in turn, is a function of the interest-rate sensitivity, volume, and

mix of its earning assets and liabilities. That is, NIM = f (Rate, Volume, Mix)

Sources of interest rate risk : The primary forms of interest rate risk include

repricing risk, yield curve risk, basis risk and optionality.

Effects of interest rate risk: Changes in interest rates can have adverse effects

both on a bank’s earnings and its economic value.

The earnings perspective: From the earnings perspective, the focus of analyses

is the impact of changes in interest rates on accrual or reported earnings.

Variation in earnings (NII) is an important focal point for IRR analysis because

reduced interest earnings will

threaten the financial performance of an institution.


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Economic value perspective: Variation in market interest rates can also affect

the economic value of a bank’s assets, liabilities, and Off Balance Sheet (OBS)

positions. Since the economic value perspective considers the potential impact

of interest rate changes on the present value of all future cash flows, it provides

a more comprehensive view of the potential long-term effects of changes in

interest rates than is offered by the earnings perspective.

Interest rate sensitivity and GAP management: This model measures the

direction and extent of asset-liability mismatch through a funding or maturity

GAP (or, simply, GAP). Assets and liabilities are grouped in this method into

time buckets according to maturity or the time until the An insightful view of

ALM is that it simply combines portfolio management techniques into a

coordinated process.

Gap Cause Interest Rate Profit (NII)

Positive RSA > RSL Rise Rise

(Asset) Fall Fall

Negative RSA < RSL Rise Fall

(Liability) Fall Rise

Zero RSA = RSL Rise No Effect

Fall No Effect

first possible resetting of interest rates. For each time bucket the GAP equals the

difference between the interest rate sensitive assets (RSAs) and the interest rate

sensitive liabilities (RSLs). In symbols:

GAP = RSAs – RSLs

When interest rates change, the bank’s NII changes based on the following


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interrelationships:

ΔNII = (RSAs - RSLs) x Δr

ΔNII = GAP x Δr

A zero GAP will be the best choice either if the bank is unable to speculate

interest

rates accurately or if its capacity to absorb risk is close to zero. With a zero

GAP, the bank is fully protected against both increases and decreases in interest

rates as its NII will not change in both cases.

As a tool for managing IRR,

GAP management suffers from three limitations:

• Financial institutions in the normal course are incapable of out-

predicting the markets, hence maintain the zero GAP.

• It assumes that banks can flexibly adjust assets and liabilities to

attain the desired GAP.

• It focuses only on the current interest sensitivity of the assets and

liabilities, and ignores the effect of interest rate movements on the value

of bank assets and liabilities.

Cumulative GAP model : In this model, the sum of the periodic GAPs is equal

to the cumulative GAP measured by the maturity GAP model. While the

periodic GAP model corrects many of the deficiencies of the GAP model, it

does not explicitly account for the influence of multiple market rates on the

interest income.

DURATION MODEL: Duration is an important measure of the interest rate

sensitivity of assets and liabilities as it takes into account the time of arrival of

cash flows and the maturity of assets and liabilities. It is the weighted average

time to maturity of all the preset values of cash flows.

Duration basic -ally refers to the average life of the asset or the liability.


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DP p = D (dR /1+R)

DGAP directly indicates the effect of interest rate changes on the net worth of

the

institution. The funding GAP technique matches cash flows by structuring the

short-term maturity buckets. On the other hand, the DGAP hedges against IRR

by structuring the portfolios of assets and liabilities to change equally in value

whenever the interest rate changes. If DGAP is close to zero, the market value

of the bank’s equity will not change and, accordingly, become immunised to

any changes in interest rates.

DGAP analysis improves upon the maturity and cumulative GAP models by

taking into account the timing and market value of cash flows rather than the

horizon maturity. It gives a single index measure of interest rate risk exposure.

The application of duration analysis requires extensive data on the specific

characteristics and current market pricing schedules of financial instruments.

However, for institutions which have a high proportion of assets and liabilities

with embedded options, sensitivity analysis conducted using duration as the sole

measure of price elasticity is likely to lead to erroneous results due to the

existence of convexity in such instruments.

Apart from this, duration analysis makes an assumption of parallel shifts in the

yield curve, which is not always true. To take care of this, a high degree of

analytical approach to yield curve dynamics is required. However,

immunisation through duration eliminates the possibility of unexpected gains or

losses when there is a parallel shift in the yield curve. In other words, it is a

hedging or risk-minimisation strategy; not a profit-maximisation strategy.

VALUE AT RISK: Refers to the maximum expected loss that a bank can

suffer over a target horizon, given a certain confidence interval. It enables the

calculation of market risk of a portfolio for which no historical data exists. It

enables one to calculate the net worth of the organization at any particular point


30

of time so that it is possible to focus on long-term risk implications of decisions

that have already been taken or that are going to be taken. It is used extensively

for measuring the market risk of a portfolio of assets and/or liabilities.

SIMULATION: Simulation models help to introduce a dynamic element in the

analysis of interest rate risk. Gap analysis and duration analysis as stand-alone

too15 for asset-liability management suffer from their inability to move beyond

the static analysis of current interest rate risk exposures. Basically simulation

models utilize computer power to provide what if scenarios


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CHAPTER 8

ALM-REPORTS

The following reports are used for ALM:

Structural Liquidity Profile (SLP);

Interest Rate Sensitivity

Maturity and Position (MAP)

Statement of Interest Rate Sensitivity (SIR)

STRUCTURAL LIQUIDITY PROFILE (SLP)

All Assets & Liabilities to be reported as per their maturity profile into 8

maturity Buckets

1. 1 to 14 days

2. 15 to 28 days

3. 29 days and up to 3 months

4. Over 3 months and up to 6 months

5. Over 6 months and up to 1 year

6. Over 1 year and up to 3 years

7. Over 3 years and up to 5 years

8. Over 5 years

STATEMENT

• Places all cash inflows and outflows in the maturity ladder as per residual

maturity

• Maturing Liability: cash outflow

• Maturing Assets : Cash Inflow

• Classified in to 8 time buckets

• Mismatches in the first two buckets not to exceed 20% of outflows


32

• Shows the structure as of a particular date

• Banks can fix higher tolerance level for other maturity buckets.

INTEREST RATE SENSITIVITY

Generated by grouping RSA, RSL & OFF-Balance sheet items in to various (8)

time buckets.

RSA

• MONEY AT CALL

• ADVANCES ( BPLR LINKED )

• INVESTMENT RSL

• DEPOSITS EXCLUDING CD

• BORROWINGS


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PERFORMANCES MEASUREMENT AND BENCHMARKING

Performance measurement is a fundamental tool used to determine whether

various parts of an organization are meeting or exceeding their objectives, and it

is also critical element of ALM. Within an institutional framework, ALM is

often practiced under explicit constraints. In order for it to succeed, the

organization must be able to measure the extent to which ALM is

accomplishing its goals by sustaining target profit or maximizing profitability.

While performance measurement is most commonly associated with portfolio

managers, it is just as relevant to other decision-making entities in the

organization. In many cases, investment related decisions made by other parts

of the organization may have a more significant impact on profitability than the

portfolio manager.

In most organizations there is a hierarchy of investment related decision-

making, which includes:

Liability Driven: The strategic asset allocation, determined by the product

manager or investment committee, is driven by the liabilities and this has a

direct impact on the profitability of the organization. Firm Driven: the chief

investment officer (CIO) may determine the tactical asset allocation. It includes

consideration of the timing of portfolio rebalancing, timing of the investment of

surplus cash or raising cash in anticipation of payouts, opportunistic

investments in application of market moves and hedging decisions and this will

indicate the profit margin of the company future.

Style: The selection of investment styles, such as growth or value equity

portfolios after considering the external opportunities, and the associated


34

portfolio managers. This decision may include the participation of an outside

consultant.

Security selection: The selection, purchased and sales of individual securities

by the individual portfolio manager. In order to evaluate the effectiveness of

these investment decisions, the related performance must be compared with

immediate competitors or benchmark that is appropriate. Some examples of

appropriate benchmarks to evaluate the asset allocation decision include: a

portfolio that has very similar cash flow characteristics as the liabilities;

Asset index returns allocated according to the strategic asset allocation. The

performance for the tactical asset allocation decision can be the market index

returns applied to the actual portfolio allocation; The style/manager selection

performance can be evaluated by comparing the performance of style-specific

or manager-specific benchmarks with the broad market indexes for the asset

class chosen for the strategic asset allocation‟ and Portfolio management can be

evaluated against style specific or manager specific benchmarks.

It may also be desirable to compare investment performance of individual

managers with appropriate peer group averages to determine the quality of the

manager versus others with similar objectives. It may also be desirable to

calculate performance relative to other institutions with similar liability profiles

in order to compare returns on the actual asset portfolio against a national

portfolio that has similar expected cash flow characteristics as the underlying

liabilities to assist in competitive evaluation and pricing decisions.


35

CHAPTER 9

ASSET LIABILITY COMMITTEE – ALCO

The Asset-Liability Committee (ALCO) consisting of the bank's senior

management including CEO should be responsible for ensuring adherence to the

limits set by the Board as well as for deciding the business strategy of the bank

(on the assets and liabilities sides) in line with the bank's budget and decided

risk management objectives.

The ALM desk consisting of operating staff should be responsible for

analyzing, monitoring and reporting the risk profiles to the ALCO. The staff

should also prepare forecasts (simulations) showing the effects of various

possible changes in market conditions related to the balance sheet and

recommend the action needed to adhere to bank's internal limits.

The ALCO is a decision making unit responsible for balance sheet planning

from risk-return perspective including the strategic management of interest rate

and liquidity risks. Each bank will have to decide on the role of its ALCO, its

responsibility as also the decisions to be taken by it. The business and risk

management strategy of the bank should ensure that the bank operates within

the limits/parameters set by the Board. The business issues that an ALCO would

consider, inter alia, will include product pricing for both deposits and advances,

desired maturity profile of the incremental assets and liabilities, etc. In addition

to monitoring the risk levels of the bank, the ALCO should review the results of

and progress in implementation of the decisions made in the previous meetings.

The ALCO would also articulate the current interest rate view of the bank and

base its decisions for future business strategy on this view. In respect of the

funding policy, for instance, its responsibility would be to decide on source and

mix of liabilities or sale of assets. Towards this end, it will have to develop a


36

view on future direction of interest rate movements and decide on a funding mix

between fixed vs floating rate funds, wholesale vs retail deposits, money market

vs capital market funding, domestic vs foreign currency funding, etc. Individual

banks will have to decide the frequency for holding their ALCO meetings.

Top Management, the CEO/CMD or ED should head the Committee. The

Chiefs of Investment, Credit, Funds Management/Treasury (forex and

domestic), International banking and Economic Research can be members of

the Committee. In addition the Head of the Information Technology Division

should also be an invitee for building up of MIS and related computerization.

Some banks may even have sub-committees.

The size (number of members) of ALCO would depend on the size of each

institution, business mix and organizational complexity.

Committee composition

Permanent members:

Chairman

Managing Director/CEO

Financial Director

Risk Manager

Treasury Manager

ALCO officer

Divisional Managers

By invitation:

Economist

Risk Consultants

Purposes and Tasks of ALCO:


37

Formation of an optimal structure of the Bank’s balance sheet to provide the

maximum profitability, limiting the possible risk level;

Control over the capital adequacy and risk diversification;

Execution of the uniform interest policy;

Determination of the Bank’s liquidity management policy;

Control over the state of the current liquidity ratio and resources

of the Bank;

Formation of the Bank’s capital markets policy;

Control over dynamics of size and yield of trading transactions

(purchase/sale of currency, state and corporate securities, shares,

derivatives for such instruments) as well as extent of diversification

thereof;

Control over dynamics of the basic performance indicators (ROE,

ROA, etc.) as prescribed in the Bank's policy.

Process of ALCO


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CHAPTER 10

ALM APPROACH

ALM in its most apparent sense is based on funds management. Funds

management represents the core of sound bank planning and financial

management. Although funding practices, techniques, and norms have been

revised substantially in recent years, it is not a new concept. Funds management

is the process of managing the spread between interest earned and interest paid

while ensuring adequate liquidity. Therefore, funds management has following

three components, which have been discussed briefly.

1. LIQUIDITY RISK MANAGEMENT

Bank’s liquidity management is the process of generating funds to meet

contractual or relationship obligations at reasonable prices at all times. New

loan demands, existing commitments, and deposit withdrawals are the basic

contractual or relationship obligations that a bank must meet.

Liquidity Tracking

Measuring and managing liquidity needs are vital for effective operation of the

Company. By assuring the Company’s ability to meet its liabilities as they

become due, liquidity management can reduce the probability of an adverse

situation. The importance of liquidity transcends individual institutions, as

liquidity shortfall in one institution can have repercussions on the entire system.

The ALCO should measure not only the liquidity positions of the Company on

an ongoing basis but also examine how liquidity requirements are likely to

evolve under different assumptions. Experience shows that assets commonly

considered being liquid, such as govt. securities and other money market


39

instruments, could also become illiquid when the market and players are

unidirectional. Therefore, liquidity has to be tracked through maturity or cash

flow mismatches. For measuring and managing net funding requirement, the use

of a maturity ladder and calculation of cumulative surplus or deficit of funds at

selected maturity dates is adopted as a standard tool.

Analysis of following factors throws light on a bank’s adequacy of liquidity

position:

i. Historical Funding requirement

ii. Current liquidity position

iii. Anticipated future funding needs

iv. Sources of funds

v. Options for reducing funding needs

vi. Present and anticipated asset quality

vii. Present and future earning capacity and

viii. Present and planned capital position

To satisfy funding needs, a bank must perform one or a combination of the

following:

i. Dispose off liquid assets

ii. Increase short term borrowings

iii. Decrease holding of less liquid assets

iv. Increase liability of a term nature

v. Increase Capital funds

Statement of Structural Liquidity

It Places all cash inflows and outflows in the maturity ladder as per residual

maturity. Maturity Liabilities are cash outflow and Maturity Assets are cash


40

inflows. The mismatches in the first two buckets cannot exceed 20% of

outflows. It shows the structure as of a particular date. Banks can fix the

tolerance level for other maturity buckets.

Assets and Liabilities to be reported as per their maturity profile into 8 maturity

buckets:

i. 1 to 14 days

ii. 15 to 28 days

iii. 29 days and up to 3 months

iv. Over 3 months and up to 6 months

v. Over 6 months and up to 1 year

vi. Over 1 year and up to 3 years

vii. Over 3 years and up to 5 years

viii. Over 5 years

Addressing the Mismatches

Mismatches can be positive or negative

Positive Mismatch: Maturing Assets > Maturing Liabilities

Negative Mismatch: Maturing Liabilities > Maturing Assets

In case of positive mismatch, excess liquidity can be deployed in money

market instruments, creating new assets & investment swaps etc.

For negative mismatch, it can be financed from market borrowings

(Call/Term), Bills rediscounting, Repos & deployment of foreign

currency converted into rupee.

Strategies

To meet the mismatch in any maturity bucket, the bank has to look into

taking deposit and invest it suitably so as to mature in time bucket with

negative mismatch.


41

The bank can raise fresh deposits of Rs 300 crore over 5 years maturities

and invest it in securities of 1-29 days of Rs 200 crores and rest matching

with other out flows.

2. ASSET MANAGEMENT

Many banks (primarily the smaller ones) tend to have little influence over the

size of their total assets. Liquid assets enable a bank to provide funds to satisfy

increased demand for loans. But banks, which rely solely on asset management,

concentrate on adjusting the price and availability of credit and the level of

liquid assets. However, assets that are often assumed to be liquid are sometimes

difficult to liquidate. For example, investment securities may be pledged against

public deposits or repurchase agreements, or may be heavily depreciated

because of interest rate changes. Furthermore, the holding of liquid assets for

liquidity purposes is less attractive because of thin profit spreads. Asset

liquidity, or how "salable" the bank's assets are in terms of both time and cost, is

of primary importance in asset management. To maximize profitability,

management must carefully weigh the full return on liquid assets (yield plus

liquidity value) against the higher return associated with less liquid assets.

Income derived from higher yielding assets may be offset if a forced sale, at less

than book value, is necessary because of adverse balance sheet fluctuations.

Seasonal, cyclical, or other factors may cause aggregate outstanding loans and

deposits to move in opposite directions and result in loan demand, which

exceeds available deposit funds. A bank relying strictly on asset management

would restrict loan growth to that which could be supported by available

deposits. The decision whether or not to use liability sources should be based on

a complete analysis of seasonal, cyclical, and other factors, and the costs

involved. In addition to supplementing asset liquidity, liability sources of

liquidity may serve as an alternative even when asset sources are available.


42

3. LIABILITY MANAGEMENT

Liquidity needs can be met through the discretionary acquisition of funds on the

basis of interest rate competition. This does not preclude the option of selling

assets to meet funding needs, and conceptually, the availability of asset and

liability options should result in a lower liquidity maintenance cost. The

alternative costs of available discretionary liabilities can be compared to the

opportunity cost of selling various assets. The major difference between

liquidity in larger banks and in smaller banks is that larger banks are better able

to control the level and composition of their liabilities and assets. When funds

are required, larger banks have a wider variety of options from which to select

the least costly method of generating funds. The ability to obtain additional

liabilities represents liquidity potential. The marginal cost of liquidity and the

cost of incremental funds acquired are of paramount importance in evaluating

liability sources of liquidity. Consideration must be given to such factors as the

frequency with which the banks must regularly refinance maturing purchased

liabilities, as well as an evaluation of the bank's ongoing ability to obtain funds

under normal market conditions.

The obvious difficulty in estimating the latter is that, until the bank goes to the

market to borrow, it cannot determine with complete certainty that funds will be

available and/or at a price, which will maintain a positive yield spread. Changes

in money market conditions may cause a rapid deterioration in a bank's capacity

to borrow at a favorable rate. In this context, liquidity represents the ability to

attract funds in the market when needed, at a reasonable cost vis-à-vis asset

yield. The access to discretionary funding sources for a bank is always a

function of its position and reputation in the money markets.

Although the acquisition of funds at a competitive cost has enabled many banks

to meet expanding customer loan demand, misuse or improper implementation


43

of liability management can have severe consequences. Further, liability

management is not riskless. This is because concentrations in funding sources

increase liquidity risk. For example, a bank relying heavily on foreign interbank

deposits will experience funding problems if overseas markets perceive

instability in U.S. banks or the economy. Replacing foreign source funds might

be difficult and costly because the domestic market may view the bank's sudden

need for funds negatively. Again over-reliance on liability management may

cause a tendency to minimize holdings of short-term securities, relax asset

liquidity standards, and result in a large concentration of short-term liabilities

supporting assets of longer maturity. During times of tight money, this could

cause an earnings squeeze and an illiquid condition.

Also if rate competition develops in the money market, a bank may incur a high

cost of funds and may elect to lower credit standards to book higher yielding

loans and securities. If a bank is purchasing liabilities to support assets, which

are already on its books, the higher cost of purchased funds may result in a

negative yield spread.

Preoccupation with obtaining funds at the lowest possible cost, without

considering maturity distribution, greatly intensifies a bank's exposure to the

risk of interest rate fluctuations. That is why banks that particularly rely on

wholesale funding sources, management must constantly be aware of the

composition, characteristics, and diversification of its funding sources.


44

ISSUES IN IMPLEMENTATION OF ALM

1. Policy: Lack of a coherent, documented and practical policy is a big hindrance

to ALM implementation. Most often, ALCO membership itself may not be

aware of implications of risks being measured and impact. Policies should

address all issues concerning the bank, all policies should be clearly explained

to all members of board, apart from ALCO and these must be documented.

Proper revisions to this document, a quarterly review needs to be organized as

well as parameters may be changing due to change in situations.

2. Understanding of complexities: Many people in a bank need to understand

risk measurements and risk mitigation procedures. Measurement of risk is a

fairly simple phenomenon and does go on regardless. Formalization of

understanding, especially at a top level, will be helpful as it would help in

decision –making.

3. Organization and culture: ALM function needs to be separated clearly from

operations as it involves control and strategy functions. Risk organization in

banks generally land up reporting to treasury, as they are people who come

closest to understanding complex financial instruments. The fact that they are a

business unit, in charge of ‘risk taking’ is overlooked. ‘Risk Taking’ and ‘Risk

management’ are generally two distinct parts of any organization and both must

report to a board completely independently. Openness and transparency are

essential to a proper risk organization. Most organizations react badly to some

positions going wrong by taking more risks and enter vicious cycle of risks.

Thus, it is required to follow policy implicitly in both letter and spirit.


45

4. Data and Models: Data may not be available at all times in requisite format. It

must be remembered that many data items are assumptions and gaps must be

measured in perspective. There was a case of a manual branch of a bank that

was closed for 6 months in a year due to inclement weather and was largely

inaccessible. As data may not be obtained from this branch for 6 months,

appropriate assumptions have to be made in any event. The argument is that for

all other purposes, assumptions are being made. Sensible options need to be

chosen and manual branch without computer was an example. However, in

modern banking, it is mapping of models to zero coupon bonds that are an issue.

Once again, arguments are that this should exist within the bank. Based on

sophistication required, multiple models may be used to validate this

conversion. This is strictly outside ALM framework but integrates into ALM

framework.

5. Unrealistic goals: An ALCO secretary was seen desperately trying to tweak

with parameters to ‘show’ less gaps in liquidity reports. A zero gap is not

practical. Returns are expected for taking risks. Banks assume market and credit

risk and hence they make returns. ALCO’s job is to correctly determine

positions and put in place appropriate remedial measures using appropriate

risks. It is not to show things as good when they are not.


46

Asset-liability management strategies for correcting mismatch

The strategies that can be employed for correcting the mismatch in terms of

D(A) > D(L) can be either liability or asset driven. Asset driven strategies for

correcting the mismatch focus on shortening the duration of the asset portfolio.

The commonly employed asset based financing strategy is securitization.

Typically the long-term asset portfolios like the lease and hire purchase

portfolios are securitized; and the resulting proceeds are either redeployed in

short term assets or utilized for repaying short-term liabilities.

Liability driven strategies basically focus on lengthening the maturity profiles of

liabilities. Such strategies can include for instance issue of external equity in the

form of additional equity shares or compulsorily convertible preference shares

(which can also help in augmenting the Tier I capital of finance companies),

issue of redeemable preference shares, subordinated debt instruments,

debentures and accessing long term debt like bank borrowings and term loans.

Strategies to be employed for correcting a mismatch in the form of D(A) < D(L)

(which will be necessary if interest rates are expected to decline) will be the

reverse of the strategies discussed above.

Asset driven strategies focus on lengthening the maturity profile of assets by the

deployment of available lendable resources in long-term assets such as lease

and hire purchase. Liability driven strategies focus on shortening the maturity

profile of liabilities, which can include, liquidating bank borrowings which are

primarily in the form of cash credit (and hence amenable for immediate

liquidation), using the prepayment options (if any embedded in the term loans);

and the call options, if any embedded in bonds issued by the company; and

raising short-term borrowings (e.g.: fixed deposits with a tenor of one year) to

repay long-term borrowings.


47

Information technology and asset-liability management in

the Indian context

Many of the new private sector banks and some of the non-banking financial

companies have gone in for complete computerization of their branch network

and have also integrated their treasury, forex, and lending segments. The

information technology initiatives of these institutions provide significant

advantage to them in asset-liability management since it facilitates faster flow

of information, which is accurate and reliable. It also helps in terms of quicker

decision-making from the central office since branches are networked and

accounts are considered as belonging to the bank rather than a branch.

The electronic fund transfer system as well as demat holding of securities also

significantly alters mechanisms of implementing asset-liability management

because trading, transaction, and holding costs get reduced. Simulation models

are relatively easier to consider in the context of networking and also computing

powers. The open architecture, which is evolving in the financial system,

facilitates cross-bank initiatives in asset-liability management to reduce

aggregate unit cost. This would prove as a reliable risk reduction mechanism.

In other words, the boundaries of asset-liability management architecture itself

is changing because of substantial changes brought about by information

technology, and to that extent the operations managers are provided with

multiple possibilities which were not earlier available in the context of large

numbers of branch networks and associated problems of information collection,

storage, and retrieval.

In the Indian context, asset-liability management refers to the management of

deposits, credit, investments, borrowing, forex reserves and capital, keeping in

mind the capital adequacy norms laid down by the regulatory authorities.

Information technology can facilitate decisions on the following issues:


48

Estimating the main sources of funds like core deposits, certificates of

deposits, and call borrowings.

Reducing the gap between rate sensitive assets and rate sensitive

liabilities,

given a certain level of risk.

Reducing the maturity mismatch so as to avoid liquidity problems.

Managing funds with respect to crucial factors like size and duration.


49

CHAPTER 11

CONCLUSION

ALM has evolved since the early 1980's. Today, financial firms are increasingly

using market value accounting for certain business lines. This is true of

universal banks that have trading operations. Techniques of ALM have also

evolved. The growth of OTC derivatives markets has facilitated a variety of

hedging strategies. A significant development has been securitization, which

allows firms to directly address asset-liability risk by removing assets or

liabilities from their balance sheets. This not only eliminates asset-liability risk;

it also frees up the balance sheet for new business.

Thus, the scope of ALM activities has widened. Today, ALM departments are

addressing (non-trading) foreign exchange risks as well as other risks. Also,

ALM has extended to non-financial firms. Corporations have adopted

techniques of ALM to address interest-rate exposures, liquidity risk and foreign

exchange risk. They are using related techniques to address commodities risks.

For example, airlines' hedging of fuel prices or manufacturers' hedging of steel

prices are often presented as ALM. Thus it can be safely said that Asset

Liability Management will continue to grow in future and an efficient ALM

technique will go a long way in managing volume, mix, maturity, rate

sensitivity, quality and liquidity of the assets and liabilities so as to earn a

sufficient and acceptable return on the portfolio.


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CHAPTER 12

WEBILOGRAPHY

Asset Liability Management in Banks – ICFAI

Bank Financial Management – Indian Institute of Banking and Finance

www.rbi.org

www.investopedia.com

www.allbankingsolutions.com

www.iibf.org.in

www.fimmda.org

asset & liability management in banks

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