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    Question

    What are the basic parameters required for stabilizing

    ALM of bank?               I.        Net Interest Margin             II.        Net Interest Income            III.        Economic Equity Ratio
    A Only A Correct Answer Incorrect Answer
    B A and B Correct Answer Incorrect Answer
    C B and C Correct Answer Incorrect Answer
    D A and C Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    Asset Liability Management (ALM) is defined as the process of adjusting bank liabilities to meet loan demands, liquidity needs and safety requirements. In the process ALM manages the Net Interest Margin within the overall risk bearing capacity of a bank. Main objectives of ALM are: 1.    to protect/enhance the market value of net worth 2.    to increase the Net Interest Income (NII) 3.    to maintain/protect spreads or Net Interest Margin (NIM) The parameters that are selected for the purpose of stabilizing ALM of banks are Net Interest Income, Net Interest Margin and Economic Equity Ratio

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