asset liability mgt 1presentation
TRANSCRIPT
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Meaning of asset and liability
asset A resource with economic value that
an individual, corporation or
country owns or controls with theexpectation that it will provide futurebenet.
liability
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Component of asset andliability
Liabilities Assets
1. Capital
2. Reserve & Surplus
3. Deposits4. Borrowings
5. Oter Liabilities
1. Cas & Balan!es witRB"
2. Bal. #it Ban$s &%one at Call an' Sort(oti!es
3. "nvest)ents
4. A'van!es
5. *i+e' Assets
,. Oter Assets
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Asset management
Liquid assets enable a bank to provide funds tosatisfy increased demand for loans. But banks,which rely solely on asset management,concentrate on adjusting the price and availability
of credit and the level of liquid assets. Asset liquidity, or how salable the bank!s
assets are in terms of both time and cost, is ofprimary importance in asset management.
"o ma#imi$e pro%tability, management mustcarefully weigh the full return on liquid assets &yield
plus liquidity value' against the higher returnassociated with less liquid assets.
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Liability Management
Liquidity needs can be met throughthe discretionary acquisition of fundson the basis of interest rate
competition.
"he alternative costs of availablediscretionary liabilities can be
compared to the opportunity cost ofselling various assets.
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Asset liability management
ALM is an integral part of the nancialmanagement process of any ban.
ALM can be termed as a ris management
techni!ue designed to earn an ade!uatereturn while maintaining a comfortablesurplus of assets beyond liabilities
"t taes into consideration interest rates,
earning power, and degree of willingness totae on debt and hence is also nown as#urplus Management
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Asset Liability Management is the on$goingprocess of formulating, implementing,
monitoring, and revising strategies relatedto assets and liabilities in an attempt toachieve nancial ob%ectives for a given setof ris tolerances and constraints
AL( is the process involving decisionmaking about the composition of assets
and liabilities including o) balance sheetitems of the bank * + and conducting therisk assessment.
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Concept of ALM
ALM is concerned with strategicmanagement of &alance #heet by givingdue weightage to maret riss vi'. Li!uidity
(is, "nterest (ate (is ) Currency (is. ALM function involves planning, directing,
controlling the *ow, level, mix, cost andyield of funds of the ban
ALM builds up Assets and Liabilities of theban based on the concept of +et "nterest"ncome +""- or +et "nterest Margin +"M-.
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Scope of ALM
ALM is a part of overall ris management of a banwhich addresses the following riss
Liquidity Risk: (is arising out of unexpected*uctuation in cash *ows from the assets andliabilities / both in baning and trading boos.
Interest Rate Risk: (is arising out of *uctuationsin the interest rates on assets and liabilities in the
baning boo. Market Risk: (is of price *uctuations due to
maret factors causing changes in the value of thetrading portfolio.
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WHY STUDY A!UT ALM"
0o gain
Competitive advantage
1alue to the organi'ation
0o reduce $ 2!uity (is
$ Li!uidity (is
$ Credit (is $ "nterest (ate (is
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Too#s for ALM Syste$
3ap Analysis
Modied 3ap Analysis
4uration 3ap Analysis 1alue at (is 1a(-
#imulation
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5b%ective of the study
0o study impact of ALM on the protabilityof di6erent ban$groups ris planning.
0o identify the measure techni!ue of ALM7which is commonly implement in bans
0o now how the ban pro%ect their protand growth through ALM
0o now how ALM a6ect the Li!uidity
planning, interest rate ris management. 0o Analysis the linage of ALM to other
areas of ris management
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not at all some very imp8
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techni!ues used byoragani'ation
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Bhich techni!ue is mostly
implement by the ban
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present#y used tec(nique
presently usedtechni!ue
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