Question

    The Asset Liability Management (ALM) Statement is to be

    prepared by every bank and is a regulatory requirement. It shows the maturity time-wise break-up of the assets and liabilities of a bank. Like the assets and liabilities are categorized into 1-14 days time bucket, 15-30 days time bucket and so on. It helps in analyzing the liquidity position of the bank. The bank can use this statement for which of the following purposes:
    A Efficient allocation of capital Correct Answer Incorrect Answer
    B Suitable pricing for the bank’s assets and liabilities Correct Answer Incorrect Answer
    C Strategic management of interest rate risk Correct Answer Incorrect Answer
    D A and B Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    ALM, among other functions, is also concerned with risk management and provides a comprehensive and dynamic framework for measuring, monitoring and managing liquidity, interest rate, foreign exchange and equity and commodity price risks of a bank that needs to be closely integrated with the banks' business strategy. It involves assessment of various types of risks and altering the asset-liability portfolio in a dynamic way in order to manage risks.

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