Managing Core Risks in Banking

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Asset Liability Management Policy Asset Liability Management (ALM) is an integral part of Bank Management; and so, it is essential to have a structured and systematic process for manage the Balance Sheet. Banks must have a committee comprising of the senior management of the bank to make important decisions related to the Balance Sheet of the Bank. The committee, typically called the Asset Liability Committee (ALCO), should meet atleast once every month to analysis, review and formulate strategy to manage the balance sheet. In every ALCO meeting, the key points of the discussion should be minuted and the action points should be highlighted to better
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As such, it is important that senior management as well as the Board of Directors must understand the existence of such risk on the balance sheet and they should ensure that the structure of the institutions’ business and the level of balance sheet risk it assumes are effectively managed, that appropriate policies and procedures are established to control and limit these risks, and that resources are available for evaluating and controlling interest rate risk. Increasingly Asset Liability Management has become an integral part of Bank Management. Banks’ are exposed to Balance Sheet Risk, where it is absolutely necessary for the management of the bank to understand the existence of such risk and best manage the exposure to the risk. The Asset Liability Committee (ALCO), comprising of the senior management of a bank, is primarily responsible for Balance Sheet Management or more specifically Balance Sheet Risk Management. The report aims at promoting international best practices in Balance Sheet Management for the banking industry in Bangladesh. The purpose of the report/ guidelines is to provide guidance to management and to train new staffs. This is intended to be the basic framework for further development as the skill sets go up the curve and also, to introduce new policies and processes as we make progress in understanding and implementing the basics.


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