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Advancing Your ALCO, Moving from Regulatory to Decision Making

Advancing Your ALCO, Moving from Regulatory to Decision Making

Date:

Details

Time: 2:00 pm EST

Description:

Facing a new set of market risks like higher interest rates, changes in economic expectations, and a more competitive “banking” space, having an ALCO process that looks at institutional goals over regulatory compliance offers advantages. Despite recent regulatory pushing for a better internal ALCO process for managing risks, many institutions are still searching for the right balance between a comprehensive ALCO approach and the time\cost vs. benefit of more resources. Many understand that the past practices of managing risks in “silos” are no longer the “best practice” but how do we “do” all the things that seem to be required and make it make sense?

In this 2-part series we will introduce the basic concepts of asset\liability management as an on-going process versus a quarterly risk assessment. We will outline what a “dynamic” risk management system looks like and show how it be worked to include traditional required measures for interest rate risk & liquidity measurement while incorporating the elements of “stress testing” in a smart and useable way. We will outline the framework for ALCO that helps provide the platform for managing both the idea of risk vs. return as well as risk vs. risk. This same framework becomes the basis for a rolling planning process and a decision platform for changing conditions.

As markets move, our decisions need to move as well. Failing to assess the moves until after they are implemented is not in line with regulatory guidance expectations, nor is it good management practice. Like any athlete, consistent training and improvement ensures long-term success. Now is the time to begin put your ALCO process into training for the challenges ahead, allowing you to make more informed, profitable decisions in the coming years.

Participants will:

  • Present your ALCO plan in context with your strategic plan and financial goals.
  • Outline the difference between static and dynamic measurements
  • Build necessary stress tests for risk areas including: Sensitivity tests & Scenario tests
  • Outline how all ALCO risks come together using scenarios
  • Shape your monthly and quarterly reporting process around your institution’s risks and goals
  • Establish a framework to measure ALCO risks in relation to one another rather than independently
  • Outline basic policy limit framework for ALCO risks

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