Alm-course Outlines-For Two Days

8/12/2019 Alm-course Outlines-For Two Days

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IST DAY

Class oneASSET-LIABILITY MANAGEMENT.

A risk management techniqe !esigne! to earn an a!eqate retrn "hile maintaining

a com#orta$le sr%ls o# earning assets $e&on! interest $earing lia$ilit& lia$ilities.

E'am%le(

2013 2012 2011 2010 2009

Interest EarningAssets 10483.08 9836.49 7981.16 6503.66 5976.54

Interest BearingLia$ilities 9775.95 9117.61 6683.81 5304.82 4822.96

Intt. BearingCa%ital 363.71 330.64 287.52 239.6 159.73

Sr%ls)!e#icit 343.42 388.24 1009.83 959.24 993.85

The %ractice o# managing risks that arise !e to mismatches $et"een the assets

*in#lo"s+ an! lia$ilities *ot#lo"s+ *Balance Sheet+ o# the $ank.

E'aml%e( MC,

Dec/ No0/ ,ct/ Se%/ 1223In#lo" o# #n! #rom assets 1444 /2/5 1364 /253

,t#lo" o# #n! #romLia$ilities

351 1547 1348 1484

Sr%ls)De#icit

ALM is a strategic management tool to manage interest rate risk an! liqi!it& risk

#ace! $& a $ank. *Mone& market instrments can %la& a 0ital role in this case+.

Lia$ilit& 9isk :arises #rom(

i. Liqi!it& %ro$lem :e'cess liqi!it& than reqire!

E'am%le(

Agst23 1223*;l&+

1223*;ne+

Call mone& len!ing* amont+

777.22 /21.22 1/5.33

Call mone& Len!ing 9ate 2.2< 2.12- 2.2-2.15


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2.5

> Liqi!it& means the a$ilit& to con0ert an asset to cash "ithot losses qickl& or as an!"hen reqire!.

> The com%onents o# liqi!it& are 9eser0e Assets? Cash in Tills? S%eci#ic Go0ernment

Secrities? oreign Crrenc& in o%en %osition an! S%eci#ic D9s.

=hat is Liqi!it& risk>

? Liqi!it& risk is the %otential #or loss to an instittion arising #rom either its

ina$ilit& to meet its o$ligation or to #n! increases in assets as the& #all !e

"ithot incrring nacce%ta$le cost or losses.

? 9eglator& Com%liance(

? Stattor& Liqi!it& 9atio *SL9+ /


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und ;ulus

@une"/era+e "/+ rate

Lendin+ 314 6.97A

und eficit (orro'in+

"u+ust"/era+e "/+ rate

(orro'in+ 475 7.25A

(enefit fro* deficit fund

$otal 789

rate of 12.25

A 11.1

,nterest #ar+in fro* deficit*+t. 5A

rofit add to total inco*e 39.45 19.725,nterest *arfin+ fro* total 1A

$otal 4100 47.15 23.575

$otal *ar+in > rofit 43.3

n! Categor& o# the $ank(

a ;hort $er* Liquidity equire*ent

! #ediu* $er* Liquidity equire*ent

c Lon+ $er* liquidity equire*ent.

3 Liquidity Management oli!y:

The Board of Directors of the bank has set out a policy on )Li*uidity !anagement+ as under

categories,

A( -hort Term Li*uidity !anagement .olicy ' /unds deployed in Current Assets within 012 to

312(

B( !edium Term Li*uidity !anagement .olicy '/unds deployed in !edium Term Assets within

142 to 112(


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C( Long Term Li*uidity !anagement .olicy '/unds deployed in Long Assets within 042 to 012(

Assets Amont < ashol!ing

Lia$ilities Amont < ashol!ing

;hort $er* Liquidityequire*ent

544.24 /3< Short Asset 5445.44 7/eo 'indo' at our request.

2. %all *oney *ar)et rates ha/e eceeded 25A for *ore than 7 consecuti/e days.

3. %all facilities ha/e !een declined !y the *ar)et or a re*iu* o/er *ar)et rates has !een i*osed

on our !orro'in+.

4. %onsolidated " ratio has eceeded 100A for *ore than 15 days.

"ctions to !e ta)en for stress situation

i. ,n/esti+ation the causes of the crisis- etend and ti*in+ of the crisis: duration of the

crises: re*edial action o a/oid the crisis.

ii. "d/ise all i/ision Heads of the crisis and cancel lea/e co**it*ents of )ey ersonnel

iii. Liquidate any lon+ fore ositions.

i/. %on/ene


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C,NTINGENCY ACTI,N @LAN T, MANAGE ST9ESSED LIPHIDITY

"o#ernment and$or Central %ank tatutory Holdings$ Liquidity 'equirements

9eglation @arameter) ormla Com%rising

Cash reserve 6% of liabilities Lcy cash at Bangladesh Bank

Liquidity Reserve 13% of liabilities Treasury Bills

Cash in Tills

Fcy balance with (an+ladeshBank

Lcy balance with Sonali Bank

!!roved "ovt# Securities and $ebenture

C,NTINGENCY ACTI,N @LAN T, MANAGE ST9ESSED LIPHIDITY


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CONTINGENCY FUNDING PLAN

Local Crrenc& Book

Mone& Market

$er* eosit

%all #oney

eo

Bangladesh Bank (Marketable secr!t!es and "eser#e P$rt%$l!$&

eo of $reasury !ills


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Kuantification of a*ount of contin+ency funds ?local currency

1. $er* eosit

2. eo facility of treasury (ills and !ond

3. ediscountin+ 'indo'

4.


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7th Class

@ricing strategies De%osit an! Loan

De%osit @ricing Techniqes(

Market orces @ricing(

eosit ricin+ is deter*ined !y the *ar)et forces of de*and for deosits and suly of deosit.

e*and for eosits -,ncrease of roducti/e areas

-,ncrease of +o/t. !orro'in+s

-increase of fluctuate !usiness

;uly of eosit - =eneral %usto*ers rate satisfaction

-discoura+e of roducti/e areas

- %ut of consu*tion of the surlus +rou in the society

Market @enetration @ricing(

$he *ethod for sellin+ deosits that usually sets lo' fees and hi+h interest rates to encoura+e

custo*ers to oen an account and then raises fees and lo'ers interest rates later on.

H%scale Target %ricing(

$he settin+ of rices and fees on deosits account in an effort to attract those custo*ers 'ho hold

hi+h !alances and urchase other !an) ser/ices.

Loan @ricing.

Loan rice %ost of !orro'ed funds F "d*in costF loan default ris) is) re*iu*F rofit

#ar+in to satisfy the share holders


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Ca+&5+at,"$ " Pr,&,$ " +"a$ 82012; 5%,$ &"%t -p+5% +"a$- pr,&,$ m"e+

i+ure in %rore"/era+e eosit "/era+e (orro'in+ "/era+e


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,te*s "*ount fund ortion ates G"%

eositsa/era+e 8:406 0.865004644 0.0735 0.063577841

%

Lia!ility

"/+.I(L =en

">% "sset "/era+e loans

@anM12 3,16 216"34 3210

e!M12 ,746 235"46 3314

#"M12 3,10 301"4 3316

"rilM12 3,01 256"6 3451

#ayM12 3,10 256346 3514

@uneM12 3,04 310"1 3451

@ulM122:750 320

"30 3360

"u+M122:856 241 431 3561

;eM123:100 245 412 3481

&ctM122:900 293

"1 3457

Bo/M122:860 287

"90 3415

ecM122:978 275 "4 3514

A0erage 1?348 182 718 /?712

"/era+e (orro'edfund

3:237


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%ost of eosit,ntt.aid on deosits J 12 J 100

10.79A

Bo.of #onths J "/+ eosits

%ost of u!l +en

a>c

,ntt.aid on deosits J 12 J 100

12.24ABo.of #onths J "/era+e eosits

%ost of "d*in &eratin+ %ost J12 J100

2.19ABo. of *onth J "/era+e fund

Eield of loan,ntt. ecei/ed J 12* J 100

14.79ABo. of #onths J "/era+e Loan

Eield of fund

,ntt. ecei/ed non intt.inco*e J

12* J 100

17.18ABo. of #onths J "/+ fund

rofit Loss rofit Loss

,nterest ecei/e 406 ,nterest ecei/e 406

,nterest aid on

eosit 320

,ntt.recei/e on I(L

=en. ">c 405,ntt.aid on I(L =en.">c

33 ,nterest aid on eosit

27

B,,153 B,,

74

&ther ,nco*e50 &ther ,nco*e

50

&eratin+ ,nco*e203 &eratin+ ,nco*e

124

&eratin+


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Gei+hted "/era+e %ost of und


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@olic& De#inition

" olicy is a set of +uidin+ rules or rinciles that are intended to influence the 'ay an or+aniation is

run or *ana+ed. olicies often co/er staff eectations: roles and rocesses in an or+aniation

@olic& ,$Jecti0es(

%aital #ana+e*ent olicy *ay !e desi+ned in 'ay to ser/e /arious urose of an institution li)e a

!an).-

i etention of institutions reutation

ii $o *eet u ;hareholders satisfaction.

iii eositors safety

i/ (an)s earnin+ er share consistency


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eqities ) shares *2


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> A!it committee o# $oar! "ill $e res%onsi$le on $ehal# o# the Boar! o# Directors to

im%lement S9@ in $anks

> Agen!a o# each meeting o# the a!it committee mst incl!e the S9@ im%lementation

in $ank.

1. Managerial La&er(

> Banks mst ha0e an e'clsi0e $o!& naming S9@ team-constitte! $& !e%artmental

hea!s o# the $ank F hea!e! $& Managing Director.

> ormation an! mo!i#ication o# S9@ team an! itQs terms o# re#erence *To9+ mst $e

a%%ro0e! $& the $oar! o# !irectors F noti#ie! to Bangla!esh Bank.

> S9@ mst meet at least $i-monthl& to monitor the im%lementation o# S9@.

> Banks mst ha0e a !ocment *calle! ICAA@+ #or assessing their o0erall risk %ro#ile F astrateg& #or maintaining a!eqate ca%ital.

This !ocment is also to $e a%%ro0e! $& the $oar! o# !irectors.

7. ,%erational La&er(

The $anks mst ha0e an o%erational nit in this res%ect "hich "ill $e res%onsi$le-

> or collecting in#ormation #rom concerne! !e%artments an! $ranches?

> 9eglator& corres%on!ences?

> Com%iling the reqire! calclations o# ICAA@ re%orting an!

> The tasks assigne! $& the S9@ team.

S%er0isor& 9e0ie" E0alation @rocess.

S%er0isor& 9e0ie" E0alation @rocess *S9E@+ o# Bangla!esh Bank incl!es !ialoge

$et"een BB an! the $ankQs S9@ team #ollo"e! $& #in!ings)e0alation o# the $ankQsICAA@.

S9E@ @rinci%les(

> 9e0ie" F e0alation o# $anksQ ICAA@ an! strategies? as "ell as their a$ilit& to monitor

an! ensre their com%liance "ith MCA9


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> To o%erate a$o0e the minimm reglator& ca%ital ratios an! shol! ha0e the a$ilit& to

hol! ca%ital in e'cess o# the minimm.

Terms o# 9e#erences S9@ Team.

> Design a %rocess #or assessing o0erall ca%ital a!eqac& in relation to risk %ro#ile o# the

$ank $siness F strateg& #or maintaining ca%ital le0els?

> De0elo% F se $etter risk management techniqes in monitoring F managing risks?

> 9ecognie the res%onsi$ilit& o# $ank management in !e0elo%ing ICAA@ F setting

ca%ital targets that are commensrate "ith the $anks risk %ro#ile F control

en0ironment?

> To maintain ca%ital a$o0e the MC9.

> To %re0ent ca%ital #rom #alling $elo" the minimm le0els reqire! to s%%ort the risk

%ro#ile o# the $ank?

> To e'ercise F e0alate the reslts o# Stress Testing?

> To meet at least $i-monthl& to monitor the im%lementation o# S9@.

@illar T"o*S9@)S9E@) ICAA@+-Co0ers all other risks associate! "ith $ank$siness #or "hich a!!itional ca%ital to $e ke%t( *Gi!eline in @D #ormat+(

A. Core 9isks.

i. Asset an! Lia$ilit& Management 9isk.

ii. oreign E'change 9isk

iii. Mone& lan!ering 9isk

i0. Cre!it Di0ision 9isk

0. In#ormation Fcommnication technolog& 9isk

0i. Internal Control an! Com%liance 9isk.

B.

i. 9esi!al 9isk

ii. Concentration 9isk

i0. Liqi!it& 9isk


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0. 9e%tation 9isk

O Strategic 9isk

Oi. Settlement 9isk

Oii 9isks relate! to core 9isk Management.

OIIi. En0ironment 9isk F climate risk

i'. ,ther material risks.


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Class or

S9@ re%orting( *ormat-E'cell+? Stress Testing

@osition o# the $ank in res%ect to risks consi!erations (

Techniqes ) Strateg&) Metho!olog& #or co0ering the loss #rom the a$o0e

risk(

. Basel :II * Ca%ital Measrement %roce!res #or the risks mentione! a$o0e-B+

1. Stress Testing *shock a$sor$ent ca%acit& that is ho" ca%ital is ero!e! #or a%%l&

the three shocks le0el like-minor? mo!erate an! maJor+.

/. A com%rehensi0e rating mo!el has $een !e0elo%e! #or e0alating si' core risks

o# the $ank *risk mentione! in A+ :Docment attache!.


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@reset %osition o# the $ank a$ot 9isks in $ank $siness.

$he !an) is *uch a'are of the ris)s in !an) !usiness. $o desi+n and *iti+ate ris)s or to

co/er the loss fro* the ris)s the !an) has ta)en so*e ra+*atic *easures-

"sset-Lia!ility #ana+e*ent ett."L#has !een esta!lished for *ana+in+ !alancesheet ris)

is) #ana+e*ent eart*ent # has also !een set to deter*ine all ris)s of the

!an)

(asel ,*le*entation %ell has also !een initiated to *easure caital for the !an) to

co/er the loss fro* ris).

(asel-,,

(asel ,*le*entation %ell 'ill *easure caital require*ent under #ini*u* %aitalequire*ent illar one of !asel-,, and ,%"">; illar t'o of !asel-,,

Item@o +. Part,&5+ar% 8 ata a% "$ 30)09)2013; Am"5$t 8&r"re;

1 5. $igibe #apita:

1 ier-1 #apita 816.19

3 ier- #apita 166.81

" " ota $igibe #apita (1AA3) 983.00

4 '. ota is Beig&ted 5ssets (B5): 8,110."4

6 #. #apita 5de;/ac atio (#5) (5"')C100 1.1

7 2. #ore #apita to (B5 (51')C 100 10.06

8 $. +/ppementar #apita to B5 (5')C100 .06

9 D. inim/m #apita e;/irement (#) 811.04

#apita aintained 983.00

#apita $%cess or +&orta 171.94

Inder illar one of !asel-,, caital is for t).171.95 crore after *eetin+ u the re+ulatory

*ini*u* require*ent.

Ca%ital n!er MC9 an! S9@ as /.1.121


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S+) N") Part,&5+ar% " R,%% Cap,ta+ Re=5,reme$t8T) Cr"re;

1 #redit is 481.3

aret is 69.7"

3 *perationa is 100.90

A) Minimum Capital Requirement under Pillar I *1).*

1 esid/a is 0.00

$!a/ation o #ore is anagement 0.00

3 #redit #oncentration is 74.19

4 Li;/idit is 74.19

6 ep/tation is 14.0"

7 +ettement is 00.00

8 +trategic is 14.0"

9 $n!ironmenta #imate #&ange is 0.00

10 *t&er materia riss 0.00

B) Additional capital required under Pillar II (SRP) 180."4

C; T"ta+ Cap,ta+ Re=5,reme$t 8A>?; "r the 6ear 2012 90."T"ta+ &ap,ta+ Ma,$ta,$e 94.31

E/&e%% "r Sh"rt a++ 3.07

%aital is also ecess for $).23.07 after caital require*ent under #% and ;. ;o the

!an) is sound in resect to *aintainin+ caital under (asel equire*ent.

Stress Testing e0alation(

A+ Sim%le Sensiti0it& Anal&sis *SSA+ *Com$ine! shock+ *igre in

crore+

;hoc)

Le/els

scenario

e+ulatory

%" A

#%-

811.05cr

#aintained

%" A

983.00 cr

%han+e in

%" after

shoc) A

#aintained

%" after

shoc) A

e+ulatory

%" F>-

"fter shoc)s

A


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;hoc)

Le/els

scenario

e+ulatory

%" A

#%-

811.05cr

#aintained

%" A

983.00 cr

%han+e in

%" after

shoc) A

#aintained

%" after

shoc) A

e+ulatory

%" F>-

"fter shoc)s

A

Alm-course Outlines-For Two Days

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