02 — Capability · BC-1780.40
Asset-Liability Management
Keep the balance sheet's assets and liabilities matched in timing, rate and currency so earnings and economic value survive rate moves, and price funding fairly inside the firm. Executing hedges and funding sits in Treasury.
- ALM
- Balance Sheet Management
- Balance Sheet Risk
In scope
- IRRBB measurement of earnings and economic value
- Balance sheet and net interest income projection
- Funds transfer pricing
- Duration and cash flow matching for insurance liabilities
Out of scope
- Executing interest rate and currency hedges, including a bank's own (see BC-230.30); this capability measures and limits them
- Trading-book market risk (see BC-1780.20)
- Tax transfer pricing between legal entities (see BC-240.40)
Decomposes into · 4
- BC-1780.40.10Banking Book Rate RiskMeasure how rate shocks change net interest income and the economic value of equity, including behavioral assumptions for deposits and prepayments.
- BC-1780.40.20Balance Sheet ProjectionProject volumes, margins and maturities across the balance sheet to plan funding, capital and net interest income.
- BC-1780.40.30Funds Transfer PricingCharge and credit business lines for the funding they use and provide, so product profitability reflects rate and liquidity cost.
- BC-1780.40.40Liability-Driven Asset MatchingMatch the duration and cash flows of an insurer's or pension book's assets to its long-term liabilities within agreed tolerances.