The core concepts of Asset Liability Management (ALM) and Balance Sheet Management have remained fairly stable in the past, but with evolving regulations Basel III redefines the global standards for bank capital, liquidity and leverage and has a profound impact on how banks manage or optimize their balance sheets. Banks across the world are shifting their focus to liquidity risk and the ability to integrate data across banking and trading books on a real-time basis.
Basel III establishes new liquidity standards that drive new balance sheet strategies to limit illiquid assets, restrict wholesale/unstable sources of funding, and manage higher funding costs. The regulations include specific requirements on how the banks should categorize their HQLA assets, net cash flows, etc. It specifies new capital target ratios and new standards for short-term funding (Liquidity Coverage Ratio) and long-term funding (Net Stable Funding Ratio). This calls for integration of balance sheet management across capital, liquidity stress testing and planning.
Intellect Balance sheet Management enables risk managers to effectively manage balance sheet risk and growth.
Salient benefits offered by the module are:
- Measure profitability and enhance transparency on attribution of earnings and costs.
- Calibrate FTP curves based on current interest rates; adjust curves on possible future interest rates.
- Forecast and proactively manage potential Liquidity Gaps at various tenors; analyse optimal funding sources to close those gaps.
- Take strategic interest rate positions within ALCO approved limits; Analyze impact on EV by running Interest Rate Risk shock scenarios.
- Protect balance sheet volatility with detailed NIM analysis at the product or more granular level.
- Visualize concentration risk by asset types, issue and issuer types, currency as well as funding sources.
- The solution provides easy to use modeling of balance sheet projections with regard to business strategies and customer behavior and the impact on value and income.
- Effective Limit Monitoring tool to track exposures for various funding sources and limiting concentration risk.