ALM Optimisation: Balance Sheet Management & Remodelling

Overview

The role of the active management of the banking book in the banking industry is constantly growing. This is dictated by heavily regulated landscape and increased competition for resources such as liquidity and capital. The efficient and productive use of a bank’s resources subject to consolidated risk and return appetite remains of upmost importance for banks of all size. The need for the use of optimization techniques to manage the banking book of a financial institution is becoming an imperative to remain profitable.

The first day of the course provides a deep dive onto the exploration of the updated IRRBB guidelines and key challenges in the overhaul of ALM systems across the banks: an integrated approach is required to ensure consistency in terms of data, methodology and avoid redundancies. It is also focused on addressing the question why the new generation of ALM systems need to be integrated and flexible and why it is so important. In addition, it will touch base on the IRRBB strategy and steering approach to close regulatory gaps and will highlight questions which need to be answered in order to develop a comprehensive and feasible IRRBB strategy and steering approach. The second part of day 1 provides detailed introduction to the modelling of NMDs as a challenge driven by the updated IRRBB guidelines.

The second part of the course is fully dedicated to the balance sheet optimization techniques and acts as an introduction to the concepts of quantification and optimization of asset and liability structures. It describes the components of the optimization process and how the objective and constraints functions have to be set up. The second part of day 2 explains the role of the Funds Transfer Pricing process in balance sheet shaping.