Bank Asset-Liability Management

Tuesday, March 24

09.00 - 09.15 Welcome and Introduction

09.15 - 12.15 The ALM in the Bank

A Global View of the Bank

  • The role and the organization of the Bank
    • Businesses and business support
    • Finance and Risk
  • The bank's balance sheet
    • Static view
    • Dynamic view
  • What functions needs to be centralized?
    • Functions with effects of scale
    • Functions with compensation effects

The ALM

  • Nature and role
  • Responsibilities and Components
  • The ALCO

Risks Identification and Cartography

  • From Nuclear Events to Financial Risks
    • The RICAP process
  • Risk Cartography
    • What business models generate what risks?

Overview of Balance Sheet Risks

  • Interest rate, FX, Equity and Liquidity risks

12.15 - 13.15 Lunch

13.15 - 16.30 Balance Sheet Risks Framework

Funds Transfer Pricing

  • Commercial and Financial Margins
    • Policies for setting the margins
    • Articulation with the global interest margin of the bank
  • Reference Refinancing
    • Setting up the right commercial incentives
    • The benefits of reference refinancing

The Regulatory Environment

  • The Regulatory Approach
    • Basel 1, 2 and 3
  • The new EU banking package
    • CRD V/CRR II/BRRD II

Case Study: Dexia

Wednesday, March 25

09.00 - 09.15 Recap

09.15 - 12.15 Assets Valuation

Valuation Principles

  • Economic view
  • Regulatory view
  • Accounting view
  • Financial Instruments categorization
  • Generating cash flows
    • Cash flows projection for various loan types
    • Embedded and other options

Regulatory Modelling

  • Exposure to Balance Sheet risks
    • Interest Rate and Liquidity Gaps
    • Behavioral Modelling Principles
  • Regulatory calculations done by the ALM
    • LCR, NSFR, IRRBB

12.15 - 13.15 Lunch

13.15 - 16.30 Balance Sheet Risks Measurement

Balance Sheet Risks

  • Measuring the Interest Rate Risk of The Banking Book
    • From gaps to interest rate curves modelling
    • Sensitivity and duration, embedded options, prepayments
  • Measuring Spread and Funding Risks
    • Articulating liquidity, spread and funding risks
    • Accounting considerations
  • Assessing Liquidity
    • Liquidity gap and ratios, LCR and NSFR
    • Liquidity reserves management
  • Case study: Credit National

Other risks and how they relate to the ALM

  • ALM and Credit Risk
    • IFRS 9
  • ALM and the Non-Financial risks
    • Operational, business and residual risks
  • Aggregating Risks

End of Day: Review and Games

Thursday, March 26

09.00 - 09.15 Recap

09.15 - 12.15 Managing Balance Sheet Risks

Controlling Risks, Hedging and Mitigation

  • Tools for Risk Control and Mitigation
    • Limits, securitization and hedging
  • Hedging
    • Interest rate and other derivatives
    • Value and cash flow hedges
    • Micro and macro hedges
  • Case Study: LTCM

Operational Concerns

  • New production modelling
  • Managing correlations between products
  • IT And Data Concerns
    • Categories of IT tools used to manage balance sheet risks
    • Emerging technologies, machine learning, intelligent reporting

12.15 - 13.15 Lunch

13.15 - 16.30 Perspectives on ALM

Economic Value Management

  • The management mechanisms of the bank
    • Top to bottom: Capital allocation and global limits
    • Bottom-up: Budget and Pricing
  • Articulating Risk and Value
    • Economic Capital
    • Measuring Added-Value
  • The Convergence of Risk and ALM Operating Models
    • Different objectives, different cultures, different silos
    • IFRS 9 breaks the silos

Current Issues

  • Macro-prudential policy
  • Sovereign and Systemic Risks
  • Low interest rate
  • Latest issues and the future of ALM

Seminar Wrap Up and Final Game

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