ALM and Capital Adequacy - Introduction

It is now time to take a look at Interest Rate Risk or Maturity Mismatch risk. Before we move on to the topic of bank capital adequacy it is important that we have a good grip on what drives Interest Rate Mismatch and Liquidity risk at a bank. We use Asset Liability Management as a tool to measure interest rate exposure and introduce the concept of maturity mismatch at a high level. This is quickly followed by an introduction to a simplified ALM framework that we will use as a foundation for the ALM stress testing report we will use in later sessions.

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Category:

Education

Tags:

• Interest rate risk
• interest rate mismatch risk
• maturity mismatch risk
• capital adequacy
• liquidity risk
• asset liability management
• interest rate exposure
• ALM framework
• Stressing testing
• ALM reports
• target accounts
• repricing
• funding
• shareholder value
• income statement