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National Conference on Banks & Savings Institutions 2014 - Virtual

ALCO Best Practices - Asset/Liability Committees

Sep 10, 2014 11:05am ‐ Sep 10, 2014 12:20pm


A well-informed ALCO focused on making decisions with the right information has far better odds of balancing current earnings needs with the challenges of preparing for the next change in the rate cycle.  Making decisions and executing effective strategies starts with gaining a clear understanding of the true risk profile of the balance sheet. It requires accurate data and supportable assumptions that reflect actual “real life” experiences of your institution. It also requires challenging the “plausible” with an understanding of the downside risks of the potential unexpected, embracing the roll of stress testing as a quality assurance component of the risk management process. This exercise prepares your ALCO to assess the risk/return tradeoffs of strategic actions aimed at managing risk and optimizing earnings over time, through a wide spectrum of rate environments, and in a manner consistent with the philosophy defined by your Board of Directors. The process that ties it all together is at the very core of every high-performing ALCO.


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