BankerCollege

This 90-minute accounting training provides an overview of ALM. It focuses on ALM principles and ALM measurement techniques, and auditor or reviewer issues with ALM.

It covers important ALM topics such as:

• Understanding liability sensitivity
• Monitoring the mismatch of maturing interest sensitive assets and liabilities
• Understanding management’s view of the future direction of interest rates
• Reviewing strategies used to react to unexpected changes in interest rates
• Managing IRR
• Understanding “immunity”
• Understanding “position management”
• Managing the “gap” position

The accounting training reviews and discusses IRR. It analyzes ways to deal with the ALM net asset- liability gap. It emphasizes the importance of valuing interest sensitive assets and liabilities at current market prices (fair value), as well as the importance of hedging fair value positions. It discusses the composition of the ALM committee (ALCO) and the decisions expected of that high level committee. Attention is focused on ALCO approaches to IRR management such as:

• Net interest income analysis (NII)
• Net present value analysis (NPV)

Examples are provided to attendees to help them learn about simulation models, particularly dynamic simulation, and also about the use of “duration” analysis. Auditor or reviewer issues are addressed, outlining an audit approach that includes:

• Reviewing the ALM policy
• Verifying the numbers used by the ALCO to make ALM decisions
• Making a commitment re: the future direction of rates and how to react to rate changes
• Comparing actual results to expected results (back test)

The accounting webinar provides an excellent review of ALM and a sound, overall understanding of the ALM function and how to best perform ALM audit coverage.