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InfrastructureDebt's Blog

October 25th, 2018 Comments

Asset-liability management - What is this?

Asset Liability Management is the abbreviation of ALM that is all about involving the set of decisions and so as the actions related with the assets and liabilities in an integrated manner. This is all done just as for the purpose to hence manage the business of the entity and also meeting up with the organization’s financial objectives.

We would be making it known as the continuing process that is adding upon with the formulation and so as the implementation and also the monitoring and revising strategies as to be related to its assets and liabilities. This is all to be carried out as to keep in mind the entity’s risk form of tolerances and so as all about the significant constraints.

What is Asset Liability Management all about?

ALM is known as the essential and critical process as in view with any set of the organization that is investing on regarding meeting up with the future cash flow needs and so as the capital requirements.

The traditional application within the ALM primarily deals with the range of managing the set of risks that are to be linked with the interest rate changes. But with the passage of time, the scope of ALM has been getting much fuller.

It is composing with the aspects of the equity risk, all along with the liquidity risk, legal risk, plus with the currency risk and so as the sovereign or country risk. The traditional form of the Asset Liability Management tools that are to be hence matching as during the time duration and so as the weighted on the average basis.

Behind the Main Objectives of Assets-Liabilities Management (ALM): 1. Plan to Meet the Liquidity Needs:

Its primary objective is all about making upon the funds to be readily available at the time-line of competitive prices even at the first task of the ALM.

This task is all about achieving upon with the proper mix of funds by way of keeping the level of non-interest funds to the category of the bare minimum, as well as also maximize the fund allocation to the high side of profit areas.

2. The arrangement of Maturity Pattern of Assets and Liabilities:

It is also concerned about matching up with the assets and liabilities over the full range of the different time bands and so as in view with keeping a tag right over the pricing. This is all done by limiting away the exposure to interest rate risk.

3. Controlling the Rate:

It also performs the task that is all about managing the rates that are to be received and paid to the category of assets /liabilities to maximize upon the spread or net interest income.

4. Spread the course of Management:

ALM also interest spread or even interest margin that is all referring to the significant difference taking place as between the earned-on top of the deployment and so as the interest paid on the acquisition of financial resources.

To sum up, with we would say that the Asset-Liability Management merely is known as the generic term that is being used over just as to refer over a wide range of things by numerous market participants.

We would be making it known as the high-level management as in view with the bank assets and so as the liabilities. In simple it is a strategy-level discipline and not just the tactical one. It performs the primary function as where it will be managing the interest-rate risk and so as the liquidity risk. It also considerably set the whole policy for the sake of credit risk and so as the credit risk management.

Article was brought to you by Seqimco - Sequoia Investment Management Company is an Asset Management Company based in London specialising in the Infrastructure Debt and Structured Finance markets.

Tags: infrastructure debt funds


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