ALM Consulting | Policy Development

The ALM Policy is the framework of the ALM process. Each bank’s balance sheet mix exposes it to different levels of the 3 main forms of financial risk: Interest Rate Risk, Liquidity Risk, and Credit Risk.

It is the universal goal of every bank to maximize its profitability, but do so in a manner that does not expose the bank to excessive levels of risk. The Policy defines the limits for key measures of risk, limits that have been established to specifically accommodate a bank’s unique balance complexion, strategic direction, and appetite for risk.

BRS has created the ALM Policy for nearly all the financial institutions we work with. The emphasis of our standard ALM Policy is on the measures of risk and their respective limits, not on internal bank procedures.

• Standard Where it Should Be

When a policy has too many guidelines, it looses meaning, and thus its usefulness. Like our ALM ADVISOR asset/liability management report set, our standard ALM Policy was created with one goal: clarity. We have done the research to determine the optimal set of key standard risk measures.

• Custom Where it Has to Be

Not standard however are the limits established for each measure. To tailor limits to your institution, we perform a 3 year statistical analysis of your bank’s balance sheet, which yields a scientific baseline of parameters for measuring risk, return, and capital. These parameters can then be further refined to allow for additional “slack”, and accommodate anticipated changes in balance sheet mix and strategic direction. This approach ensures the limits established for your bank can be substantiated.

• Consistent, and Dynamic

Our standard ALM Policy was created to work hand-in-hand with our ALM ADVISOR asset/liability management report set. The standard risk measures within the ALM policy are reported quarterly in the ALM ADVISOR along with the risk limits. When the ALM Policy gets updated the new risk limits flow through to the ALM ADVISOR. We believe the ALM Policy should be dynamic, and adapt to the changing complexion of a bank.

At least annually, we review the established risk limits for appropriateness to a bank’s current balance sheet mix and strategic direction, and recommend any necessary modifications.

• Key Service Points

• Standard Fee:

• Typical Turnaround Time:

• Standard Delivery Mode:

• Consultation Included:

• Typical Consultation Time:

• Customizations Available:

$600

3 to 5 Business Days

Email (PDF)

Yes

30 Minutes

Yes