Asset Liability Management: Best Practices

Course Overview This four day course aims to explain treasury asset liability management techniques and provide an introductory overview of modern bank treasury operations. While the nature and scope of treasury activities may be different from one banking organisation to another, they all hinge upon the treasury's inheritance of the company’s financial balance sheet (and often off balance sheet positions) – which it safeguards for liquidity and interest/currency exchange risks. The case studies are derived from experiences in treasury operations of large, multinational money centre banks. The customer groups encompass retail and institutional borrowers such as mortgage holders as well as depositors. This course will analyse how a modern treasury performs its responsibilities ranging from liquidity and liability funding to managing the firm’s banking book(s) – termed as “asset liability management” in industry jargon. This intensive 4-day course on asset liability management (ALM) best practice and applications features: Managing net interest income at risk in banking books Interest rate gaps vs. Value at Risk (VaR) – when to use which measure Fund transfer pricing (FTP) mechanisms in commercial banks Liquidity management and interest rate management in modern bank treasuries Modelling customer behaviour in replicating portfolios Allocating regulatory capital and Basel II considerations New regulatory impetus governing liquidity risk (‘Basel III’) Case studies drawn from leading global financial institutions Who Should Attend? Group Treasurers Accounting and Finance Managers Financial Accountants CFO Asset Liability Managers Liquidity Managers Risk Managers and Risk Controllers Internal Auditors External Auditors Bank Regulators Heads of Treasury Why not recommend this course to a colleague? Methodology As with all Euromoney Training courses, this programme makes use of case studies and exercises to ensure that you leave the course, ready to apply your new knowledge. FTS Eligible This programme is approved for listing on the Financial Training Scheme (FTS) Programme Directory and is eligible for FTS claims subject to all eligibility criteria being met. Please note that in no way does this represent an endorsement of the quality of the training provider and programme. Participants are advised to assess the suitability of the programme and its relevance to participants’ business activities or job roles. The FTS is available to eligible entities, at a 50% funding level of programme fees subject to all eligibility criteria being met. FTS claims may only be made for programmes listed on the FTS Programme Directory with the specified validity period. Please refer to www.ibf.org.sg for more information.
Day 1 Introduction to ALM Banking books vs. Trading books Interest rate risk in treasury banking books Liquidity risk Funds transfer pricing (FTP) The case for scale economies and skill centralisation Identifying economic value added of customer banking businesses Product and customer profitability controls The treasury business remit The treasury “banking books” Net interest income generation (with/without customer margin) Liquidity risk (internal lender of last resort) Re-pricing risk (interest rates, FX) Gap analysis Maturity mismatch risk and the dynamics of liquidity gaps Short term (medium term and long term) funding and securing of contingent funding/liquidity sources Modelling (replicating) customer assets and liabilities “The model books” The maturity mismatch and “riding the yield curves” Regulatory compliance and rating safeguarding Counterparty default and settlement risks Management of a customer banking book Hedging risks with “macroswaps” Basis risks in banking books Duration of fixed income equity Case study: Hedging repricing risks with constant maturity swaps Day 2 Modelling interest rate risk Deterministic vs. Stochastic models Equilibrium vs. “No arbitrage” models Yield curve bootstrapping and interpolation Scenario analysis Treasury philosophies beyond liquidity providers of last resort Profit centres: NII producers Service centres: Margin stability providers Case study: Repricing gaps vs. DV01/duration Case study: Liquidity gaps Managing asset liquidity Cast study: Stress testing deposit “stickiness’’ Accounting for treasury books: IFRS MtM vs. “Available for sale” vs. “Held to maturity” books Accrued vs. MtM Accounting Standards Link to financial accounting for net interest income Regulatory compliance - Liquidity Replicating portfolios and margin stabilisation Core assets/liabilities Volatile assets/liabilities Modelling volume elasticities - Best practices Case study: Static replication of OTC products via exchange traded products Day 3 Risk management in treasury operations Market risks and VaR Basel II, pillar 2 impacts Credit and counterparty default risks Operational risks Funding liquidity risk Cashflow profiles Forecasting and modelling cashflows Asset liquidity risk and liability liquidity risk Best practices risk management standards Modelling customer behaviour Model risks Stress testing in ALM books Risk mitigation Application of derivatives Case studies: Bank liquidity crises Day 4 Effective risk governance Case study: Defining risk appetite Establishing risk limits - Best practices Risk management information systems (MIS) Effective risk policies Responsibilities 6 organisational consequences Contingency planning for liquidity Lessons learned from the financial crisis The role of internal and external auditors Integration of ALM within firm-wide risk management Congruence with corporate strategy Case discussion: Business unit steering through effective ALM Group portfolio management and impact on ALM Case study: Managing correlations