Basel III Liquidity Norms Addressing the ALM mismatches and its impact on Bank

Balance sheet
Banks are exposed to several risks in the course of their business, viz., credit
(default) risk, market risk (liquidity risk, interest rate risk, foreign exchange risk,
equity/commodity price risk) and operational (failed people, process, system) risk.
Asset Liability Management (ALM) is a distinct branch of market risk management,
predominantly covering management of Liquidity Risk and Interest Rate Risk. It is defined as
managing both assets and liabilities simultaneously for the purpose of minimizing the
adverse impact of interest rate movement, providing liquidity and enhancing the market
value of equity. It is also defined as planning procedure which accounts for all assets and
liabilities of a bank by rate, amount and maturity."
Introduction of Basel III liquidity norms has increased the significance of managing ALM
within Banks more efficiently. It has enforced more restrictions on leveraging ALM
mismatches for profit maximization. Banks need to revisit their strategies in managing ALM
duly supporting the top line and bottom line growth and also complying with the regulatory
requirements.
Project: To study the ALM profile of the Bank and analyze the impact of the Basel Liquidity
norms on Banks Balance sheet and suggest the strategies to be adopted.
Expected Outcome: The report should be able to answer the key issues discussed below
a)
b)
c)
d)
e)

Overview of ALM profile of Indian Banks

Key issues in ALM due to Basel III Norms
Expected impact on the lending and deposit profile
Profit optimisation strategies to be adopted
Scope and level of change in portfolio mix required to achieve the twin objectives
mentioned above

Skills Required:
a)
b)
c)
d)

Fare knowledge about Banking

Understanding about ALM/Basel Norms
Strong analytical skills and MS Excel skills
Knowledge about MS Access/VB would be desirable

Team Size: 3-4 members

Project duration: Maximum of one month
Point of Contact: Padmanabhan TM +91 93879 91400;
padmanabhantm@federalbank.co.in