Sample asset liability management policy - Free Download
Documentsplace.com presents on this page a free sample asset liability management policy (ALMP) that was formulated for a bank but can easily be adjusted to meet the needs of any financial institution.
This excellent sample covers in detail all the areas including funding and risk issues to be managed by the asset liability committee (ALCO) as can be seen from the topics covered.
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 risks such as interest rate risk, liquidity risk and market 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 bank 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 management functions of the institutionís financial position.
Topics Covered in the Example
More About this Document
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 ALM policy.
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