Asset Liability Management Policy (almp) - Free
Documentsplace.com presents on this page a free asset liability
management policy (almp) that was formulated for financial
risk management and can easily be adjusted to meet the needs of any
financial institution. From this policy you will get a first-hand view
of what is asset liability management.
This excellent sample covers in detail all the areas including
funding and risk issues to be managed by the asset liability committee
(ALCO) and risk manager, as can be seen from the
topics covered in the almp.
Why is there Need for an ALM Policy?
An asset liability management policy involves strategic management of
the company's balance sheet with a view to achieving solvency, long-term
growth as well as profitability. To this end, there is a multiplicity of
responsibilities and activities including, but not limited to, the
management of various business risks such as interest rate risk,
liquidity risk, market risk and operational risk. The formulation of
strategic goals and objectives for the medium and long-term also forms
part of such planning.
The objectives set by a business are usually pursued within the
framework of written capital, credit and investment policies. Assets and
liabilities are therefore managed in order to enhance profitability,
maximize shareholder value, increase capital, to serve the needs of
customer and the community, to protect the entity from disastrous
financial consequences that may arise from interest rate changes.
In a capsule, the goal of the company is to achieve solid operating
results, against a background of a quality balance sheet, through
dynamic and sound funds management. As such, the asset liability policy
includes: (1) An outline the responsibilities and scope of ALCO; (2) It
defines, measure and manages consistently the various risks facing the
Bank; (3) It establish guidelines to meet all applicable statutes and
regulatory rules; (4) Coordinate the risk management functions of the
institutionís financial position.
- The meaning of asset liability management
- The reasons for such a policy
- Responsibilities of Asset/Liability Committee (ALCO), including
its meetings and reporting requirements
- Primary objectives including set targets for return on assets,
return on equity, net interest margin, productivity, solvency and
- Funds management and liquidity, taking into account liquidity
risk, changing demographics, liquidity exposure, funding and
- Interest rate risk management, covering gap management,
simulation and asset allocation strategies
- Management of credit risk including credit policy objectives,
credit process, risk diversification, pricing for risk, and
accounting for problem loans
- Market risk, covering trading risk and foreign exchange risk
- Preparation and review of the annual budget
- Application of cost management strategies designed to achieve
- Targeted profitability ratios for return on assets, return on
equity, and net interest margin
- Income taxes
- Payment of
- Capital and risk weighting of assets
- Compliance with business laws and regulations
- Policy considerations
More About this ALMP
There is extensive coverage of liquidity risk and funding,
investment, interest rate management and simulation, asset allocation
strategies, credit risk management, and market risk, including trading
risk and foreign exchange risk. Also included are details on
profitability and productivity, income tax, dividends and capital, among
other important areas. Effective asset management can only be achieved
with the employment of a professionally formatted policy.
Download a copy of the
document in Microsoft Word.
Need more help still? Try the
ALM Basics for Community Financial Institutions
sold at amazon.com.