EXECUTIVE SUMMARY

Asset Liability Management is the most important aspect for the Banks to manage Balance Sheet Risk, especially for managing of liquidity risk and interest rate risk. Failure to identify the risks associated with business and failure to take timely measures in giving a sense of direction threatens the very existence of the institution. Implementing Asset Liability Management (ALM) function in banks is not only a regulatory requirement in India but also an imperative for strategic bank management. With profit becoming the a key-factor, it has now become imperative for banks to move towards integrated balance sheet management where components of balance sheet and its different maturity mix will be looked at profit angle of the bank. Asset Liability Management is based on three pillars and they are ALM Information System, ALM Organization and ALM Process. ALM brings to bear a holistic and futuristic perspective to the balance sheet management. Banks provide services that exposes them to various risks like credit risk, liquidity risk, interest rate risk to name a few. It is therefore appropriate for banks to focus on ALM when they face different types of risks. There are different techniques used by banks for Asset Liability Management and they are GAP analysis Model, Duration Gap analysis Model, Simulation Model and Value at Risk.

Sr. No.

Topic
INTRODUCTION
Asset Liability Management Components of Financial Statements Balance Sheet Profit & Loss Account Rate Sensitive Assets and Liabilities Risk Associated with Asset Liability Management Purpose of Asset Liability Mismatch Addressing the Mismatches Elements of Asset Liability Management Three Pillars of ALM Asset Liability Committee ALCO Process of ALCO Organization Structure of ALCO ALM Approach Liquidity Risk Management Asset Management

Pg. No.

1. 2. 3. 3.1 3.2 4. 5. 6. 7. 8. 9. 10. 10.1 10.2 11. 11.1 11.2

6. 7. 9. 9. 11. 13. 14. 18. 19. 21. 23. 25. 27. 28. 29. 29. 32.

11.3 12.

Liability Management Procedure for examining Asset Liability Management

33. 35.

13. 14. 15. 15.1 15.2 15.3 15.4 16. 17. 18.

Regulatory Framework Issues in implementation of ALM Techniques of ALM Gap Analysis Model Duration Gap Analysis Model Simulation Analysis Value at Risk GAP & NII Bibliography CONCLUSION

38. 40. 42. 42. 46. 47. 49. 50. 54.