Download presentation
Presentation is loading. Please wait.
Published byLoreen Cain Modified over 8 years ago
2
ALM bsenver@superonline.com 1 ASSET & LIABILITY MANAGEMENT IN COMMERCIAL BANKS Instructor……Bülent Şenver bsenver@superonline.com
3
ALM bsenver@superonline.com 2 Asset Management Liability Management ALM Asset t Liability
4
ALM bsenver@superonline.com 3 ASSET & LIABILITY MANAGEMENT (ALM) DEFINITION ALM is continuously arranging and rearranging the assets and liabilities of the bank without infringing the liquidity and safety of the bank and with the purpose of maximizing the bank’s profits.
5
ALM bsenver@superonline.com 4 LIQUIDITY The ability of a bank to fulfill its obligations, and after doing so having enough cash left to do its normal daily banking business.
6
ALM bsenver@superonline.com 5 SAFETY The ability of a bank’s “Share Holder’s Equity” (SHI) to absorb the future possible losses that may arise and after doing so having enough SHI left to run the bank and to comply with the minimum “Capital Requirements”.
7
ALM bsenver@superonline.com 6 Capital protects your bank in rainy days!..
8
ALM bsenver@superonline.com 7 ALM DEVELPOMENT 1950’s 1960’s 1970’s ASSET MNG. LIABILITY MNG. ASSET & LIABILITY MNG. LOAN PRODUCTS DEPOSIT PRODUCTS LOAN & DEPOSIT BOTH
9
ALM bsenver@superonline.com 8 Deregulations SC of Accounts GAAP Reorganization Management Computerization Office Automation Personal Training Internet
10
ALM bsenver@superonline.com 9 YesterdayTomorrow Arena Services Organizatio n & Reporting Data
11
ALM bsenver@superonline.com 10 NEW DEVOPLEPMENTS 1. Deregulation of Interest Rates 2. Deregulation of Foreign Exchange Operations 3. Changes in Laws and Regulations 4. Increase in Deposit Interest Rates
12
ALM bsenver@superonline.com 11 NEW DEVELOPMENTS 5. Increase in Deposit Interest Rates 6. Change in Deposit Characteristics Increase in Term-Deposits Decrease in Demand-Deposits Increase in Short Terms
13
ALM bsenver@superonline.com 12 NEW DEVELOPMENTS 7. Increase in Personnel Expenses 8. Increase in Operating Expenses 9. Increase in Technology Investments 10. Frequent Changes in Interest Rates 11. Increase in Share Capital Requirements
14
ALM bsenver@superonline.com 13 NEW DEVELOPMENTS 12. Change in Asset Structure Increase in Government Bonds Increase in Treasury Bills Increase in Foreign Exch. Loans Increase in Short Term Loans Increase in Non-Performing Loans Increase in Consumer Loans
15
ALM bsenver@superonline.com 14 NEW DEVELOPMENTS 13. Decrease in S/H Equity Growth 14. Increase in Customer Expectations 15. New Service Points Small Branches ATM and POS Telephone and Internet Banking 16. 24 Hours 365 Days Banking
16
ALM bsenver@superonline.com 15 19501970198019902000 SALES FORCE BRANCH CALL CENTER INBOUND MAIL CREDIT CARD ATM TELEPHONE BANKING PC BANKING DIRECT MAIL CALL CENTER OUTBOUND DEBİT CARD RELATIONSHIP MANAGEMENT IN-STORE BRANCH DATABASE MARKETING SMART CARD KIOSK INTERNET BANKING SCREEN PHONES INTERNET ATM VIDEO KIOSK INTERACTIVE TV SPACE SHARING FRANCHISE BRANCHES REMOTE RELATIONSHIP MANAGEMENT Kaynak: A.T.Kearney
17
ALM bsenver@superonline.com 16 FINANCIAL STATEMENTS 1. BALANCE SHEET 2. STATEMENT OF INCOME 3. STATEMENT OF SHAREHOLDER’S EQUITY 4. SOURCES & USES OF FUNDS STATEMENT
18
ALM bsenver@superonline.com 17 Balance Sheet Income Statement Assets Liabilities Loans Treasury Bills Interest Income Interest Expences Net Interest Income Deposits Debt I nterest Earning Assests I nterest Bearing Liabiliti es Non- Interest Earning Assests Non- Interest Bearing Liabiliti es Share Holders’ Equity Total AssetsTotal Liabilities =
19
ALM bsenver@superonline.com 18 Balance Sheet Income Statement Assets Liabilities Loans Treasury Bills Interest Income Interest Expence Net Interest Income Deposit s Debt Interest Earning Assests Interest Bearing Liabiliti es Non - Interest Earnin g Assests Non - Interest Bearing Liabiliti es Share Holders’ Equity Total AssetsTotal Liabilities = 100 80 Interest Rate Assets = %20 36 Interest Rate Liabiliti es = %5 120 60 9 27 3535 30 35
20
ALM bsenver@superonline.com 19 BALANCE SHEET SHOWS The Financial Position of a Bank As at a specific date. As of Dec. 31,1998
21
ALM bsenver@superonline.com 20 BALANCE SHEET EQUATION 100 = ASSETS = Equals = 100 LIABILITIES + Plus SHAREHOLDER’S EQUITY
22
ALM bsenver@superonline.com 21 ASSET CLASSIFICATION
23
ALM bsenver@superonline.com 22 LIABILITY CLASSIFICATION
24
ALM bsenver@superonline.com 23 BALANCE SHEET Assets Liquid Assets 150 Loans 400 Marketable Securities 200 Investment Securities 50 Fixed Assets 100 Accrued Interest 70 Other Assets 80 Total Assets 1050
25
ALM bsenver@superonline.com 24 BALANCE SHEET Liabilities Deposits 400 Bank Borrowings 150 Accrued Expenses 100 Other Liabilities 80 Bonds Issued 70 Shareholder’s Equity 250 Total Liabilities & S/HE 1050
26
ALM bsenver@superonline.com 25 SHAREHOLDER’S EQUITY Share Capital 100 Legal Reserves 30 Retained Earnings 50 Revaluation Surplus 20 Share Premiums 10 Net Income 40 Total S/H Equity 250
27
ALM bsenver@superonline.com 26 BALANCE SHEET DOES NOT SHOW Interest Rates Interest Sensitivity Due Dates Foreign Currency breakdown Collateral
28
ALM bsenver@superonline.com 27 STATEMENT OF INCOME SHOWS The results of operations of a bank. For the period between two dates. For the year ended Dec. 31, 1998
29
ALM bsenver@superonline.com 28 NET PROFIT
30
ALM bsenver@superonline.com 29 TOTAL INCOME
31
ALM bsenver@superonline.com 30 NET INTEREST INCOME
32
ALM bsenver@superonline.com 31 time $ interest income interest expense net interest income + -
33
ALM bsenver@superonline.com 32 NET INTEREST INCOME
34
ALM bsenver@superonline.com 33 NET NON-INTEREST INCOME
35
ALM bsenver@superonline.com 34 STATEMENT OF INCOME Interest Income 1000 Interest Expense (700) Net I.Income 300 Non Interest Income 220 Operating Expenses (450) Pre-Tax Profit 70 Tax Provision (30) Net Income 40
36
ALM bsenver@superonline.com 35 ANALYSIS OF PROFIT
37
ALM bsenver@superonline.com 36 BANKING RISKS
38
ALM bsenver@superonline.com 37 BANKING RISKS C AMELC AMEL A M E L
39
ALM bsenver@superonline.com 38 C AMEL Capital AdequacyCapital Adequacy
40
ALM bsenver@superonline.com 39 C A MEL Asset QualityAsset Quality
41
ALM bsenver@superonline.com 40 CA M EL Management QualityManagement Quality
42
ALM bsenver@superonline.com 41 CAM E L Earnings EfficiencyEarnings Efficiency
43
ALM bsenver@superonline.com 42 CAME L Liquidity RiskLiquidity Risk
44
ALM bsenver@superonline.com 43 CAMEL RISKS Capital AdequacyCapital Adequacy Asset QualityAsset Quality ManagementManagement EarningsEarnings LiquidityLiquidity
45
ALM bsenver@superonline.com 44 BANKING RISKS 1.2.3.4.5.CAMEL 6. Credit Risk 7. Interest Rate Risk 8. Interest Rate Sensitivity Risk 9. Foreign Exchange Availability Risk 10. F/X Position Risk
46
ALM bsenver@superonline.com 45 BANKING RISKS 11. Accounting & Reporting Risk 12. Computer Risk 13. Capital Market Operations Risk 14. Money Market Operations Risk 15. Country (Sovereign) Risk 16. Pricing Risk 17. Market Risk
47
ALM bsenver@superonline.com 46 BANKING RISKS 18. Theft Risk 19. Fraud & Defalcations Risk 20. Natural Disasters 21. Strategic Risk 22. Fiduciary Risk 23. Transaction Risk 24. Regulatory/Compliance
48
ALM bsenver@superonline.com 47 BANKING RISKS 25. Reputation Risk 26. Large Loans/Deposits Risk 27. Concentration Risk
49
ALM bsenver@superonline.com 48 RATIO ANALYSIS Numerator ______________________ Denominator
50
ALM bsenver@superonline.com 49 RATIO ANALYSIS Balance Sheet __________________ Balance Sheet Income Statement ________________ Balance Sheet
51
ALM bsenver@superonline.com 50 RATIO ANALYSIS What is the LEVEL ? What is the TREND ?
52
ALM bsenver@superonline.com 51 RATIO ANALYSIS 1. Capital Adequacy 2. Asset Quality 3. Management 4. Earnings & Efficiency 5. Liquidity
53
ALM bsenver@superonline.com 52 CAPITALADEQUACY RATIO ANALISIS CAPITAL ADEQUACY “The Capital of a Bank protects the Bank against unexpected future losses.”
54
ALM bsenver@superonline.com 53 CAPITAL ADEQUACY RATIO ANALYSIS CAPITAL ADEQUACY 1. Shareholders’ Equity ------------------------------------ Total Assets The ability of the present Capital to support the further growth of Assets
55
ALM bsenver@superonline.com 54 CAPITAL ADEQUACY RATIO ANALYSIS CAPITAL ADEQUACY 2. Shareholders’ Equity ------------------------------------ Risk Weighted Assets
56
ALM bsenver@superonline.com 55 CAPITAL ADEQUACY RATIO ANALYSIS CAPITAL ADEQUACY 3. Shareholders’ Equity ------------------------------------ Risk Weighted Assets + RW Contingent Liabilities
57
ALM bsenver@superonline.com 56 CAPITAL ADEQUACY RATIO ANALYSIS CAPITAL ADEQUACY 4. Total Debt ------------------------------------ Shareholder’s Equity The ability to raise additional Debt Capital
58
ALM bsenver@superonline.com 57 CAPITAL ADEQUACY RATIO ANALYSIS CAPITAL ADEQUACY 5. Financial Leverage : Total Assets ------------------------------------ Shareholder’s Equity
59
ALM bsenver@superonline.com 58 CAPITAL ADEQUACY RATIO ANALYSIS CAPITAL ADEQUACY 6. Capital Formation Rate : Retained Net Income (RNI) -------------------------------------------------- Average Shareholder’s Equity RNI = Net Income - Dividends to be paid The internal growth of Equity Capital
60
ALM bsenver@superonline.com 59 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 1. Loans -------------------------------- Total Assets
61
ALM bsenver@superonline.com 60 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 2. Non Performing Loans = a) Loans past due more than 90 days b) Loans not accruing interest c) Loans with low interest rates d) Loans on which repayment terms have been renegotiated.
62
ALM bsenver@superonline.com 61 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 3. Non Performing Loans ------------------------------------- Total Loans Indicates how much of the loan portfolio is non performing.
63
ALM bsenver@superonline.com 62 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 4. Reserves for Non Performing Loans ---------------------------------------------- Non Performing Loans Indicates the ability of the loan loss reserve to absorb potential losses from currently non performing loans.
64
ALM bsenver@superonline.com 63 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 5. Loan Loss Provision ------------------------------------- Average Loans Shows current income reduction in anticipation of loan losses.
65
ALM bsenver@superonline.com 64 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 6. Net Charge - Offs ------------------------------------- Average Loans Shows current income reduction in anticipation of loan losses.
66
ALM bsenver@superonline.com 65 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 7. Interest Earning Assets ------------------------------------------------- Total Assets
67
ALM bsenver@superonline.com 66 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 8. Non Interest Earning Assets ------------------------------------------------- Total Assets
68
ALM bsenver@superonline.com 67 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY “A Bank with no profit is like a human body with no blood.”
69
ALM bsenver@superonline.com 68 THE PRIMACY OF EARNINGS A bank can not sustain itself long without a positive cash flow. Earnings are essential to : 1.Absorb loan losses 2.Finance internal growth of capital 3.Attract investors to supply capital
70
ALM bsenver@superonline.com 69 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 1. Return on Assets ( ROA ) Net Income -------------------------------------------- Total Average Assets
71
ALM bsenver@superonline.com 70 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 2. Return on Equity ( ROE ) Net Income -------------------------------------------- Average Shareholder’s Equity
72
ALM bsenver@superonline.com 71 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 3. Return on Equity ( ROE ) ROE = ROA * Equity Multiplier ROE = ( NI / AST ) * ( AST / SHEQ )
73
ALM bsenver@superonline.com 72 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 4. Interest Income -------------------------------------------- Average Interest Earning Assets
74
ALM bsenver@superonline.com 73 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 5. Net Interest Income -------------------------------------------- Average Total Assets
75
ALM bsenver@superonline.com 74 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 6. Interest Income on Loans -------------------------------------------- Average Total Loans
76
ALM bsenver@superonline.com 75 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 7. Total Operating Expense ------------------------------------------------- Total Operating Income
77
ALM bsenver@superonline.com 76 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 8. Efficiency Ratio Non Interest Expense ---------------------------------------------------- Net Interest Income + Fees Commissions
78
ALM bsenver@superonline.com 77 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 9. Break Even Ratio Total Expenses - Non Interest Income ---------------------------------------------------- Total Average Interest Earning Assets
79
ALM bsenver@superonline.com 78 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 10. Net Free Funds Ratio Non Paying Liabilities - Non Earning Assets -------------------------------------------------- Interest Earning Assets
80
ALM bsenver@superonline.com 79 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 11. Interest Rate Sensitivity Gap : Interest Rate Sensitive Assets ( minus ) Interest Rate Sensitive Liabilities Shows the net amount to be effected by the future change of interest rates in the market
81
ALM bsenver@superonline.com 80 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 12. Interest Rate Sensitivity Gap Ratio : Interest Rate Sensitive Assets ------------------------------------------------- Interest Rate Sensitive Liabilities
82
ALM bsenver@superonline.com 81 LIQUIDITY RATIO ANALYSIS LIQUIDITY “Inadequate Liquidity of a Bank may cause an accident similar to an airplane crash !”
83
ALM bsenver@superonline.com 82 LIQUIDITY RATIO ANALISIS LIQUIDITY 1. Loans ------------------------- Deposits
84
ALM bsenver@superonline.com 83 LIQUIDITY RATIO ANALISIS LIQUIDITY 2. Liquid Assets ------------------------- Deposits
85
ALM bsenver@superonline.com 84 LIQUIDITY RATIO ANALISIS LIQUIDITY 3. Liquid Assets -------------------------------- Deposits + Borrowings
86
ALM bsenver@superonline.com 85 LIQUIDITY RATIO ANALISIS LIQUIDITY 4. Assets Due for the Period ----------------------------------------- Liabilities Due for the Period
87
ALM bsenver@superonline.com 86 LIQUIDITY RATIO ANALISIS LIQUIDITY 5. Net Large Liabilities ----------------------------------------- Net Earning Assets Both numerator & denominator are net of short-term assets. Measures the extent to which net earning assets would be effected by the loss of a bank’s large liabilities.
88
ALM bsenver@superonline.com 87 LIQUIDITY RATIO ANALISIS LIQUIDITY 6. Liquid Assets ----------------------------------------- Large Liabilities Measures the assets readily available to cover a loss of large liabilities.
89
ALM bsenver@superonline.com 88 LIQUIDITY RATIO ANALISIS LIQUIDITY 7. Core Deposits ----------------------------------------- Earning Assets Indicates the extend to which earning assets are funded by those deposits considered stable and not subject to interest rate disintermediation.
90
ALM bsenver@superonline.com 89 LIQUIDITY RATIO ANALISIS LIQUIDITY 8. Brokered Deposits ----------------------------------------- Earning Assets Measures the extent to which a bank is funding assets with high-priced and volatile brokered deposits.
91
ALM bsenver@superonline.com 90 MATURITY ANALISIS
92
ALM bsenver@superonline.com 91 MATURITY ANALYSIS
93
ALM bsenver@superonline.com 92 OFF - BALANCE SHEET RISK 1. Loan Commitments ----------------------------------------- Average Assets Shows the extent of a bank’s obligation to make loans.
94
ALM bsenver@superonline.com 93 OFF - BALANCE SHEET RISK 2.Contingent Liabilities & Commitments ---------------------------------------------------- Average Assets Shows the extent of a bank’s commitments & contingent liabilities.
95
ALM bsenver@superonline.com 94 RISKS I manage Assets! % rates, due dates... I manage Liabilities % rates, due dates...
96
ALM bsenver@superonline.com 95 ASSET & LIABILITY MATCH
97
ALM bsenver@superonline.com 96 A & L Match Amounts Currency Due Dates Interest Rates Interest Sensitivity Volatility
98
ALM bsenver@superonline.com 97 Foreign Exchange Position USA $ Short Position $Liabilities>$Assets USA $ Long Position $Assets>$Liabilities
99
ALM bsenver@superonline.com 98 F/X Position Strategy Increasing F/X Rates Decreasing F/X Rates Long Position YES NO Short Position NO YES
100
ALM bsenver@superonline.com 99 Interest Rate Sensitivity Interest Rate Sensitive Assets/Liabilities IRSA/L are such assets and Liabilities whose interest rates will change before their due dates when there is a change in market interest rates.
101
ALM bsenver@superonline.com 100 Interest Rate Sensitivity Interest Rate Sensitive Assets & Liabilities Interest Rate Non-Sensitive Assets & Liabilities VARIABLE RATES FIXED RATES
102
ALM bsenver@superonline.com 101 Interest Rate Sensitivity Gap IRS GAP = (IRSA – IRSL) Positive Gap IRSA>IRSL Negative Gap IRSL>IRSA
103
ALM bsenver@superonline.com 102 Interest Rate Sensitivity Strategy Interest Rates Will Increase Interest Rates Will Decrease Positive IRS GAP YES NO Negative IRS GAP NO YES
104
ALM bsenver@superonline.com 103 INTEREST MARGIN INCREASING THE INTEREST MARGIN %
105
ALM bsenver@superonline.com 104 INCREASING INTEREST MARGIN Interest Income…………..200 Interest Expense…………( 50 ) ---------- INTEREST MARGIN….. 150 ----------
106
ALM bsenver@superonline.com 105 time $ interest income interest expense net interest income + -
107
ALM bsenver@superonline.com 106 INCREASING THE INTEREST MARGIN
108
ALM bsenver@superonline.com 107 INCREASING THE INTEREST MARGIN BANK STRATEGY Increase Size ACTION 1.Expand Assets 2.Reduce Fixed Assets 3.Increase Equity Base
109
ALM bsenver@superonline.com 108 INCREASE THE INTEREST MARGIN BANK STRATEGY Change Interest Spread ACTION 1.Re-Price Asset Portfolio 2.Re-Price Liability Portfolio
110
ALM bsenver@superonline.com 109 INCREASE THE INTEREST MARGIN BANK STRATEGY Alter Asset / Liability Mix ACTION 1.Plan Taxes 2.Reduce Liquidity 3.Increase Aggressiveness 4.Change Asset Yield Sensitivity 5.Change Liability Cost Sensitivity
111
ALM bsenver@superonline.com 110 INCREASE THE INTEREST MARGIN BANK STRATEGY Increase Size ACTION Expand Assets IMPLEMENTATION 1.Offer new Products and Services 2.New Loans/Deposits 2.Open new Branches 3.Expand Promotion Budget 4.Reduce Interest Spread
112
ALM bsenver@superonline.com 111 EXPAND ASSETS REPERCUSSION 1.Increase operating Expenses 2.Need for Capital 3.F/A Regulations 4.Decrease Capital Ratio 5.Reduce ROA IMPLEMENTATION 1.Offer new Products and Services 2.New Loans/Deposits 3.Open new Branches 4.Expand Promotion Budget 5.Reduce Interest Spread
113
ALM bsenver@superonline.com 112 INCREASE THE INTEREST MARGIN BANK STRATEGY Increase Size ACTION Increase Equity Base IMPLEMENTATION 1.Reduce Dividend pay out 2.Offer Dividend reinvestment 3.Sell Stock 4.Establish Employee Stock Ownership PL
114
ALM bsenver@superonline.com 113 INCREASE EQUITY BASE REPERCUSSIONS 1.Hurt shareholders 2.Double taxation S/H 3.Reduce ability to leverage ROA, dilution of earnings 4.Continued Employee Expectations IMPLEMENTATION 1.Reduce Dividend pay out 2.Offer Dividend reinvestment 3.Sell Stock 4.Establish Employee Stock Ownership PL
115
ALM bsenver@superonline.com 114 INCREASE INTEREST MARGIN BANK STRATEGY Change Interest Spread ACTION Re-price Portfolio IMPLEMENTATION 1.Increase rates on Loans 2.Compound return more frequently 3.Reduce rates on Deposits 4.Compound cost less frequently
116
ALM bsenver@superonline.com 115 REPRICE PORTFOLIO REPERCUSSIONS 1.Lose business Loan quality decrease 2.Increase operations Client dissatisfaction 3.Lose business Liquidity problem 4.Increase operations Client dissatisfaction IMPLEMENTATION 1.Increase rates on Loans 2.Compound return more frequently 3.Reduce rates on Deposits 4.Compound cost less frequently
117
ALM bsenver@superonline.com 116 INCREASE INTEREST MARGIN BANK STRATEGY Alter Asset/Liability Mix ACTION Reduce Liquidity IMPLEMENTATION 1.Minimize cash 2.Minimize due from 3.Sell Securities & Bonds 4.Increase short term Deposits
118
ALM bsenver@superonline.com 117 REDUCELIQUIDITY REDUCE LIQUIDITY REPERCUSSION 1.Liquidity Risk 2.Lose correspondent 3.Incur book losses 4.Increase volatility of deposits IMPLEMENTATION 1.Minimize cash 2.Minimize due from 3.Sell Securities & Bonds 4.Increase short term Deposits
119
ALM bsenver@superonline.com 118 INCREASE INTEREST MARGIN BANK STRATEGY Alter Asset/Liability Mix ACTION Increase Aggressiveness IMPLEMENTATION 1.Increase loan/deposit ratio 2.Increase highest yielding loans 3.Increase highest yielding securities
120
ALM bsenver@superonline.com 119 INCREASE AGGRESSIVENESS REPERCUSSION 1.Increase need for capital 2.Increase loan losses 3.Increase security losses IMPLEMENTATION 1.Increase loan/deposit ratio 2.Increase highest yielding loans 3.Increase highest yielding securities
121
ALM bsenver@superonline.com 120 INCREASE INTEREST MARGIN BANK STRATEGY Alter Asset/Liability Mix ACTION Change Asset Yield Sensitivity IMPLEMENTATION 1.Increase S/T & variable rate assets if rates will increase 2.Decrease S/T & variable rate assets if rates will decrease
122
ALM bsenver@superonline.com 121 CHANGE ASSET YIELD SENSITIVITY REPERCUSSION 1.Wrong estimate of interest movement, thereby reducing interest spread IMPLEMENTATION 1.Increase S/T & variable rate assets if rates will increase 2.Decrease S/T & variable rate assets if rates will decrease
123
ALM bsenver@superonline.com 122 INCREASE INTEREST MARGIN BANK STRATEGY Alter Asset/Liability Mix ACTION Change Liability Cost Sensitivity IMPLEMENTATION 1.Decrease S/T & variable rate liabilities if rates will increase 2.Increase S/T & variable rate liabilities if rates will decrease
124
ALM bsenver@superonline.com 123 CHANGE LIABILITY COST SENSITIVITY REPERCUSSION 1.Wrong estimate of interest movement, thereby reducing interest spread IMPLEMENTATION 1.Decrease S/T & variable rate liabilities if rates will increase 2.Increase S/T & variable rate liabilities if rates will decrease
Similar presentations
© 2024 SlidePlayer.com Inc.
All rights reserved.