Asset and Liability Management BS1 (1)
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Transcript of Asset and Liability Management BS1 (1)
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1
ASSET & LIABILITY
MANAGEMENT IN
COMMERCIAL BANKS
InstructorBlent enver
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Asset
Management
Liability
Management
ALMAssett
Liability
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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 ofmaximizing the banks profits.
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LIQUIDITY
The ability of a bank to fulfill its
obligations, and after doing so havingenough cash left to do its normal daily
banking business.
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5
SAFETY
The ability of a banks Share Holders
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 CapitalRequirements.
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Capital protects your bankin rainy days!..
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ALM DEVELPOMENT
1950s 1960s 1970s
ASSET
MNG.
LIABILITY
MNG.
ASSET &
LIABILITY
MNG.LOAN
PRODUCTS
DEPOSIT
PRODUCTS
LOAN &
DEPOSIT
BOTH
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8Deregulations
SC of Accounts
GAAP
Reorganization
Management
Computerization
Office Automation
PersonalTraining
Internet
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9
Yesterday Tomorrow
Arena
Services
Organizatio
n
&Reporting
Data
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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
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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
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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
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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
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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
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15
1950 1970 1980 1990 2000
SALES FORCE
BRANCH
CALL CENTER
INBOUND
MAIL
CREDIT
CARD
ATM
TELEPHONE
BANKING
PC
BANKING
DIRECT
MAIL
CALL CENTER
OUTBOUND
DEBT
CARD
RELATIONSHIP
MANAGEMENT
IN-STORE
BRANCH
DATABASE
MARKETING
SMART CARD
KIOSK
INTERNET
BANKING
SCREEN
PHONES
INTERNETATM
VIDEOKIOSK
INTERACTIVE
TV
SPACE
SHARING
FRANCHISE
BRANCHES
REMOTE
RELATIONSHIP
MANAGEMENT
Kaynak: A.T.Kearney
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FINANCIAL STATEMENTS
1. BALANCE SHEET
2. STATEMENT OF INCOME
3. STATEMENT OF
SHAREHOLDERS EQUITY
4. SOURCES & USES OF FUNDSSTATEMENT
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Balance Sheet Income StatementAssets Liabilities
Loans
Treasury Bills
Interest Income
Interest Expences
Net Interest Income
Deposits
Debt
InterestEarning
Assests
InterestBearing
Liabiliti
es
Non-
InterestEarning
Assests
Non-
InterestBearing
Liabiliti
esShare Holders
Equity
Total Assets Total Liabilities=
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Balance Sheet Income StatemenAssets Liabilities
Loans
Treasury
Bills
Interest Income
Interest Expenc
Net Interest Income
Deposits
Debt
Interest
Earning
Assests
Interest
Bearing
Liabiliti
es
Non-Interest
Earning
Assests
Non-
InterestBearing
Liabiliti
esShare Holders
Equity
Total Assets Total Liabilities=
100
80
Interest
Rate
Assets
=
%20
36
Interest
Rate
Liabiliti
es=
%5
120
60 9
27353035
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BALANCE SHEET
SHOWS
The Financial Positionof a Bank
As at a specific date.
As of Dec. 31,1998
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20
BALANCE SHEET
EQUATION 100 =
ASSETS =
Equals
= 100
LIABILITIES
+ Plus
SHAREHOLDERSEQUITY
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ASSET CLASSIFICATION
NON INTEREST EARNING
ASSETS
INTEREST EARNING
ASSETS
TOTALASSETS
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LIABILITY
CLASSIFICATION
INTEREST BEARING
LIABILITIES
NON INTEREST BEARING
LIABILITIES
TOTALLIABILITIES
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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
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BALANCE SHEET Liabilities
Deposits 400
Bank Borrowings 150
Accrued Expenses 100
Other Liabilities 80
Bonds Issued 70
Shareholders Equity 250
Total Liabilities & S/HE 1050
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SHAREHOLDERS EQUITY
Share Capital 100
Legal Reserves 30
Retained Earnings 50
Revaluation Surplus 20
Share Premiums 10
Net Income 40
Total S/H Equity 250
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BALANCE SHEET
DOES NOT SHOW
Interest Rates
Interest Sensitivity Due Dates
Foreign Currency
breakdown Collateral
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STATEMENT OF INCOME
SHOWS
The results ofoperations of a bank.
For the periodbetween two dates.
For the year ended
Dec. 31 , 1998
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NET PROFIT
TOTAL
INCOME
TOTAL
EXPENSE
NET PROFIT
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TOTAL INCOME
NET
INTERESTINCOME
NET
NON-INTERESTINCOME
TOTAL
INCOME
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NET INTEREST INCOME
INTERESTINCOME
(+)
INTERESTEXPENSE
(-)
NET
INTEREST
INCOME
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[email protected] 31time
$interest
income
interest
expense
net interest
income
net interest
income
+
-
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NET INTEREST INCOME
INTERESTEARNINGASSETS
B/S
INTERESTINCOME
P/L
INTERESTBEARINGLIABILITIES
B/S
INTERESTEXPENSE
P/L
NETINTEREST
INCOME
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NET NON-INTEREST
INCOME
NON
INTERESTINCOME
(+)
NON
INTERESTEXPENCE
(-)
NET
NON-INTEREST
INCOME
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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
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ANALYSIS OF PROFIT
PROFIT FROM
BANKING OPERATIONS
(NET OPERATING INCOME)
(NOI)
PROFIT FROM
EXTRAORDINARY
TRANSACTIONS
(PEXT)
PROFIT FROM
SECURITY
TRANNSACTIONS
(PST)
NETPROFIT
(NP)
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BANKING
RISKS
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BANKING RISKS
C AMEL A
M
E
L
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CAMEL
Capital
Adequacy
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C
AMEL
Asset
Quality
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CA
MEL
Management
Quality
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CAM
EL
Earnings
Efficiency
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CAME
LLiquidity
Risk
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CAMEL RISKS
Capital
Adequacy
Asset Quality
Management
Earnings Liquidity
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ALM
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
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ALM
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
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ALM
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
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ALM
47
BANKING RISKS
25. Reputation Risk
26. Large Loans/Deposits Risk
27. Concentration Risk
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ALM
48
RATIO ANALYSIS
Numerator
______________________Denominator
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ALM
49
RATIO ANALYSIS
Balance Sheet__________________
Balance Sheet
Income Statement________________
Balance Sheet
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ALM
50
RATIO ANALYSIS
What is the
LEVEL ?
What is the
TREND ?
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ALM
51
RATIO ANALYSIS
1. Capital Adequacy
2. Asset Quality
3. Management
4. Earnings & Efficiency
5. Liquidity
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ALM
52
RATIO ANALISIS
CAPITALADEQUACY
The Capital of aBank protects the
Bank against
unexpected future
losses.
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ALM
53
RATIOANALYSIS
CAPITAL ADEQUACY 1.
Shareholders Equity
------------------------------------
Total Assets
The ability of the present Capital to support
the further growth of Assets
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ALM
54
RATIOANALYSIS
CAPITAL ADEQUACY 2.
Shareholders Equity------------------------------------
Risk Weighted Assets
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ALM
55
RATIOANALYSIS
CAPITAL ADEQUACY 3.
Shareholders Equity------------------------------------
Risk Weighted Assets
+RW Contingent Liabilities
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ALM
56
RATIOANALYSIS
CAPITAL ADEQUACY 4.
Total Debt------------------------------------
Shareholders Equity
The ability to raise additional Debt Capital
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ALM
57
RATIOANALYSIS
CAPITAL ADEQUACY 5. Financial Leverage :
Total Assets------------------------------------
Shareholders Equity
RATIO ANALYSIS
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ALM
58
RATIOANALYSIS
CAPITAL ADEQUACY
6. Capital Formation Rate :
Retained Net Income (RNI)--------------------------------------------------
Average Shareholders Equity
RNI = Net Income - Dividends to be paid
The internal growth of Equity Capital
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ALM
59
RATIO ANALISIS
ASSETQUALITY 1.
Loans
--------------------------------
Total Assets
RATIO ANALISIS
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ALM
60
RATIO ANALISIS
ASSETQUALITY
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.
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ALM
61
RATIO ANALISIS
ASSETQUALITY
3. Non Performing Loans
-------------------------------------
Total Loans
Indicates how much of the loan portfolio is
non performing.
RATIO ANALISIS
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ALM
62
RATIO ANALISIS
ASSETQUALITY
4. Reserves for Non Performing Loans
----------------------------------------------
Non Performing Loans
Indicates the ability of the loan loss reserve
to absorb potential losses from currentlynon performing loans.
A O A A S S
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ALM
63
RATIO ANALISIS
ASSETQUALITY
5. Loan Loss Provision
-------------------------------------
Average Loans
Shows current income reduction in
anticipation of loan losses.
RATIO ANALISIS
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ALM
64
RATIO ANALISIS
ASSETQUALITY
6. Net Charge - Offs
-------------------------------------
Average Loans
Shows current income reduction in
anticipation of loan losses.
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ALM
65
RATIO ANALISIS
ASSETQUALITY 7.
Interest Earning Assets
-------------------------------------------------
Total Assets
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ALM
66
RATIO ANALISIS
ASSETQUALITY 8.
Non Interest Earning Assets-------------------------------------------------
Total Assets
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ALM
67
RATIO ANALISIS
EARNINGS&EFFICIENCY
A Bank with noprofit is like a human
body with no blood.
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ALM
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
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ALM
69
RATIO ANALISIS
EARNINGS&EFFICIENCY 1. Return on Assets ( ROA )
Net Income
--------------------------------------------
Total Average Assets
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ALM
70
RATIO ANALISIS
EARNINGS&EFFICIENCY 2. Return on Equity ( ROE )
Net Income
--------------------------------------------
Average Shareholders Equity
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ALM
71
RATIO ANALISIS
EARNINGS&EFFICIENCY 3. Return on Equity ( ROE )
ROE = ROA * Equity Multiplier
ROE = ( NI / AST ) * ( AST / SHEQ )
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ALM
72
RATIO ANALISIS
EARNINGS&EFFICIENCY 4.
Interest Income
--------------------------------------------
Average Interest Earning Assets
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ALM
73
RATIO ANALISIS
EARNINGS&EFFICIENCY 5.
Net Interest Income
--------------------------------------------
Average Total Assets
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ALM
74
RATIO ANALISIS
EARNINGS&EFFICIENCY 6.
Interest Income on Loans
--------------------------------------------
Average Total Loans
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ALM
75
RATIO ANALISIS
EARNINGS&EFFICIENCY 7.
Total Operating Expense
-------------------------------------------------
Total Operating Income
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ALM
76
RATIO ANALISIS
EARNINGS&EFFICIENCY 8. Efficiency Ratio
Non Interest Expense
----------------------------------------------------
Net Interest Income + Fees Commissions
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ALM
77
RATIO ANALISIS
EARNINGS&EFFICIENCY 9. Break Even Ratio
Total Expenses - Non Interest Income
----------------------------------------------------
Total Average Interest Earning Assets
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78
RATIO ANALISIS
EARNINGS&EFFICIENCY 10. Net Free Funds Ratio
Non Paying Liabilities - Non EarningAssets
--------------------------------------------------
Interest Earning Assets
RATIO ANALISIS
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ALM
79
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 thefuture change of interest rates in the market
RATIO ANALISIS
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ALM
80
RATIO ANALISIS
EARNINGS&EFFICIENCY
12. Interest Rate Sensitivity Gap Ratio :
Interest Rate Sensitive Assets-------------------------------------------------
Interest Rate Sensitive Liabilities
RATIO ANALYSIS
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ALM
81
RATIO ANALYSIS
LIQUIDITY
InadequateLiquidity of a Bank
may cause an
accident similar to an
airplane crash !
RATIO ANALISIS
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ALM
82
RATIO ANALISIS
LIQUIDITY 1.
Loans-------------------------
Deposits
RATIO ANALISIS
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ALM
83
RATIO ANALISIS
LIQUIDITY 2.
Liquid Assets-------------------------
Deposits
RATIO ANALISIS
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ALM
84
RATIO ANALISIS
LIQUIDITY 3.
Liquid Assets--------------------------------
Deposits + Borrowings
RATIO ANALISIS
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ALM
85
RATIO ANALISIS
LIQUIDITY 4.
Assets Due for the Period-----------------------------------------
Liabilities Due for the Period
RATIO ANALISIS
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ALM
86
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 earningassets would be effected by the loss of a
banks large liabilities.
RATIO ANALISIS
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ALM
87
RATIO ANALISIS
LIQUIDITY
6. Liquid Assets
-----------------------------------------
Large Liabilities
Measures the assets readily available to
cover a loss of large liabilities.
RATIO ANALISIS
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ALM
88
RATIO ANALISIS
LIQUIDITY
7. Core Deposits
-----------------------------------------
Earning Assets
Indicates the extend to which earning assets
are funded by those deposits consideredstable and not subject to interest rate
disintermediation.
RATIO ANALISIS
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ALM
89
RATIO ANALISIS
LIQUIDITY
8. Brokered Deposits
-----------------------------------------
Earning Assets
Measures the extent to which a bank is
funding assets with high-priced and volatilebrokered deposits.
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ALM
90
MATURITY ANALISIS
Days 0-10 10-30 30-60 60-90
Cash 100 200 300 50
Loans 200 500 200 100300 700 500 150
Deposit 400 300 800 20
Borrow 150 200 200 30550 500 1000 50
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ALM
91
MATURITY ANALYSIS
Days 0-10 10-30 30-60 60-90
Asset 100 500 1000 2000Liab 300 200 1500 700
Short - -200 -500Long + +300 1300
OFF BALANCE SHEET
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ALM
92
OFF - BALANCE SHEET
RISK
1. Loan Commitments
----------------------------------------- Average Assets
Shows the extent of a banks obligation tomake loans.
OFF BALANCE SHEET
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ALM
93
OFF - BALANCE SHEET
RISK
2.Contingent Liabilities & Commitments
---------------------------------------------------- Average Assets
Shows the extent of a banks commitments& contingent liabilities.
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ALM
94
RISKS
I manage
Assets!% rates,
due dates...
I manage
Liabilities% rates,
due dates...
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ALM
95
ASSET & LIABILITY MATCH
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A & L Match
Amounts
Currency Due Dates
Interest Rates
Interest Sensitivity Volatility
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97
Foreign Exchange Position
USA $ Short Position
$Liabilities>$Assets
USA $ Long Position
$Assets>$Liabilities
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ALM
98
F/X Position Strategy
Increasing
F/X Rates
Decreasing
F/X Rates
Long Position
YES NO
Short PositionNO YES
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99
Interest Rate Sensitivity
Interest Rate Sensitive Assets/Liabilities
IRSA/L are such assets and Liabilitieswhose interest rates will change before their
due dates when there is a change in market
interest rates.
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ALM
100
Interest Rate Sensitivity
Interest Rate Sensitive
Assets & Liabilities
Interest Rate
Non-Sensitive
Assets & Liabilities
VARIABLE RATES FIXED RATES
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ALM
101
Interest Rate Sensitivity Gap
IRS GAP =
(IRSAIRSL)
Positive Gap
IRSA>IRSL
Negative Gap
IRSL>IRSA
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ALM
102
Interest Rate Sensitivity Strategy
Interest Rates
Will Increase
Interest Rates
Will Decrease
Positive
IRS GAP YES NO
NegativeIRS GAP NO YES
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ALM
103
INTEREST MARGIN
INCREASING THE
INTEREST MARGIN%
INCREASING INTEREST
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ALM
104
INCREASING INTEREST
MARGIN
Interest Income..200
Interest Expense( 50 )----------
INTEREST MARGIN.. 150
----------
$
-
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105/123
ALM
105time
interest
income
interest
expense
net interest
income
net interest
income
+
-
INCREASING THE
-
7/29/2019 Asset and Liability Management BS1 (1)
106/123
ALM
106
INCREASING THE
INTEREST MARGINBANK STRATEGY TO
INCREASE
SIZE
CHANGE
INTEREST
SPREAD
ALTER
ASSET/LIABILITY
MIX
INCREASE THE
INTEREST MARGIN
INCREASING THE
-
7/29/2019 Asset and Liability Management BS1 (1)
107/123
ALM
107
INCREASING THE
INTEREST MARGIN BANK STRATEGY
Increase Size
ACTION
1.Expand Assets
2.Reduce Fixed Assets
3.Increase Equity Base
INCREASE THE
-
7/29/2019 Asset and Liability Management BS1 (1)
108/123
ALM
108
INCREASE THE
INTEREST MARGIN BANK STRATEGY
Change
Interest Spread
ACTION
1.Re-PriceAsset Portfolio
2.Re-Price
Liability Portfolio
INCREASE THE
-
7/29/2019 Asset and Liability Management BS1 (1)
109/123
ALM
109
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
INCREASE THEINTEREST MARGIN
-
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110/123
ALM
110
INTEREST MARGIN
BANK STRATEGY
IncreaseSize
ACTION
ExpandAssets
IMPLEMENTATION 1.Offer new Products
and Services
2.New Loans/Deposits
2.Open new Branches
3.Expand Promotion
Budget
4.Reduce InterestSpread
EXPAND ASSETS
-
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111/123
ALM
111
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 InterestSpread
INCREASE THE
-
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112/123
ALM
112
INTEREST MARGIN
BANK STRATEGY
IncreaseSize
ACTION
Increase
Equity Base
IMPLEMENTATION
1.Reduce Dividend
pay out
2.Offer Dividend
reinvestment
3.Sell Stock
4.Establish EmployeeStock Ownership PL
INCREASE EQUITY BASE
-
7/29/2019 Asset and Liability Management BS1 (1)
113/123
ALM
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 EmployeeStock Ownership PL
INCREASE INTEREST
-
7/29/2019 Asset and Liability Management BS1 (1)
114/123
ALM
114
INCREASE INTEREST
MARGIN BANK STRATEGY
ChangeInterest
Spread
ACTION
Re-pricePortfolio
IMPLEMENTATION
1.Increase rates on
Loans
2.Compound return
more frequently
3.Reduce rates on
Deposits 4.Compound cost less
frequently
-
7/29/2019 Asset and Liability Management BS1 (1)
115/123
ALM
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
INCREASE INTEREST
-
7/29/2019 Asset and Liability Management BS1 (1)
116/123
ALM
116
INCREASE INTEREST
MARGIN BANK STRATEGY
Alter Asset/LiabilityMix
ACTION
Reduce Liquidity
IMPLEMENTATION
1.Minimize cash 2.Minimize due from
3.Sell Securities &
Bonds
4.Increase short term
Deposits
-
7/29/2019 Asset and Liability Management BS1 (1)
117/123
ALM
117
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
INCREASE INTEREST
-
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118/123
ALM
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
INCREASE
-
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119/123
ALM
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
INCREASE INTEREST
-
7/29/2019 Asset and Liability Management BS1 (1)
120/123
ALM
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
CHANGE ASSET YIELD
-
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121/123
ALM
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
INCREASE INTEREST
-
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122/123
ALM
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
CHANGE LIABILITY COST
-
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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