Asset Liability Management
Asset-liability management (ALM) is the process of planning, organizing, and controlling asset and liability volumes, maturities, rates, and yields in order to minimize liquidity and interest rate risk, while maintaining acceptable profitability.
Liquidity refers to the ability of an institution to meet demands for funds. Liquidity management means ensuring that institution maintains sufficient liquidity to cater to business growth and meet institution’s strategic and operating expenses.
The objective of ALM is to maintain a desired level of interest rate risk while maximizing profitability. Interest rate risk is defined as possible impact of interest rate movement on economic value or net interest margins of the institution.
As part of our integrated suite of Risk Management Products, the ALM System enables financial institutions manage their structural and dynamic liquidity risk, interest rate risk, dynamic asset allocation and enable dynamic cash flow modeling for sensitivity and scenario analysis. Apart from complying with key regulatory benchmarks and reporting for ALM it also caters to advanced Basel III concepts such as Liquidity risk and Net Stable Funding ratio based on central bank guidelines incorporating principles of Basel II and III.
It enables comprehensive multi-dimensional analysis of the balance sheet through customer behavior modeling, economic valuation, interest rate scenarios and other analytical variables. ALM helps you optimize size and use of surplus cash reserves – releasing strategic cash for revenue generation.
Apart from basic liquidity, it helps in historical simulation, sensitivity and Scenario Analysis through advanced techniques such as sampling / conditional event mapping/expert judgment. The system has capability to incorporate and model scenarios for assets and liabilities and movement of interest rate curves providing risk based liquidity and rate sensitive profile of the organization.
KEY PRODUCT FEATURES
Meta Data Management
The product provides for cash Flow Generation Engine with proprietary algorithms for deal level data modeling of facility, transaction, General ledger and accounts. Complex rule engine helps in defining Cash flow splitting, bucketing, assumptions and general ledger mapping.
Stress Testing & Scenario Analysis
Stress Scenario analysis through unencumbered volatility adjusted liquid assets for estimation of forward liquidity exposure and coverage of cash obligations. It allows dynamic simulation for multiple scenario analysis and stress testing.
Business and Functional Rules
The product caters to metadata management complementing with business rule engine which allows simultaneous set up of business rules for differentiated reporting through one touch batch processing, execution & reporting.
Structural Liquidity & Interest Rate Risk Analysis
The platform enables distinct and cumulative analysis of long term liquidity profile to assess structural trends in cash flow pattern for the bank. The product enables interest rate sensitivity analysis with gap measurement and computation of basis and yield curve risk
Platform for Planning, Forecasting and budgeting risk appetite
The Product enables Forecasting, budgeting and planning of existing and future cash flows for advanced balance sheet and interest rate management. It helps banks manage maturity and interest rate risk concentrations across various time intervals for strategic balance sheet management.
Integrated Data Model and Risk Data Warehouse
Our Risk Data Warehouse and integrated data model lends capability to integrate with key risk management modules such as Basel II / III capital calculation, capital consolidation, portfolio management and Internal capital adequacy assessment plan (ICAAP). A module wise approach enables ease of implementation for each component of our offering.
Basel III & BCBS Liquidity guidelines
It provides comprehensive coverage and reporting of various key liquidity measures under Basel III and other Basel Committee guidelines such as such Liquidity Ratio, Net Stable Funding Ratio, Leverage ratio etc.
Multiple Interest Rate Benchmarks
Capability to incorporate multiple yield curves for managing basis risk for a variety of assets across multiple time horizons.