Bank Balance Sheet Risk Management
Asset and Liability Management (ALM) is the discipline of managing a bank's balance sheet at the aggregate level — and the Asset and Liability Committee (ALCO) is the senior forum that owns it. This series takes you through ALM's governance home and then through the three core risk and adequacy frameworks ALCO oversees: interest rate risk in the banking book (IRRBB), liquidity adequacy (ILAAP) and capital adequacy (ICAAP).
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Module 1 — ALCO & the ALM Governance Framework
The governance foundation of bank balance sheet management. Learn how ALM emerged as a discipline, what the ALCO is responsible for, and what separates a genuinely effective committee from a backward-looking talking shop — from the traditional remit and regulatory good practice to MI pack design, committee culture and the role of the Chair.
The governance foundation of bank balance sheet management. Learn how ALM emerged as a discipline, what the ALCO is responsible for, and what separates a genuinely effective committee from a backward-looking talking shop — from the traditional remit and regulatory good practice to MI pack design, committee culture and the role of the Chair.
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Module 2 — Interest Rate Risk in the Banking Book (IRRBB)
The core non-traded market risk the ALCO manages. Understand how changes in interest rates hit both a bank's earnings and the economic value of its balance sheet — covering the four sources of IRRBB (repricing, yield curve, basis and optionality), measurement from the earnings (NII) and economic value (EVE) perspectives, stress testing, and Pillar 2 governance.
The core non-traded market risk the ALCO manages. Understand how changes in interest rates hit both a bank's earnings and the economic value of its balance sheet — covering the four sources of IRRBB (repricing, yield curve, basis and optionality), measurement from the earnings (NII) and economic value (EVE) perspectives, stress testing, and Pillar 2 governance.
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Module 3 — Liquidity Adequacy (ILAAP)
How a bank demonstrates it can survive liquidity stress. A practitioner walk-through of the Individual Liquidity Adequacy Assessment Process — liquidity risk defined, the Overall Liquidity Adequacy Rule (OLR), board and ALCO governance, stress testing and firm-specific vulnerabilities, risk appetite calibration, and the Use Test that proves it drives real decisions.
How a bank demonstrates it can survive liquidity stress. A practitioner walk-through of the Individual Liquidity Adequacy Assessment Process — liquidity risk defined, the Overall Liquidity Adequacy Rule (OLR), board and ALCO governance, stress testing and firm-specific vulnerabilities, risk appetite calibration, and the Use Test that proves it drives real decisions.
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Module 4 — Capital Adequacy (ICAAP)
How a bank assesses and defends the adequacy of its capital. A practitioner walk-through of the Internal Capital Adequacy Assessment Process — from identifying the material risks capital must cover, through stress testing and scenario analysis, to governance, capital planning and the Use Test, plus how ICAAP aligns with the ILAAP on assumptions and scenarios.
How a bank assesses and defends the adequacy of its capital. A practitioner walk-through of the Internal Capital Adequacy Assessment Process — from identifying the material risks capital must cover, through stress testing and scenario analysis, to governance, capital planning and the Use Test, plus how ICAAP aligns with the ILAAP on assumptions and scenarios.