All bankers benefit from solid knowledge of Bank Asset-Liability Management. With a great sense of humor and a wealth of experience, Prof. Moorad Choudhry keeps bankers and executives updated on the latest developments in the field. A view from the classroom:
One of the participants in the program hit the nail on the head when describing Bank Asset-Liability Management (ALM) as the transforming function that reduces banking to its essential core. And rightfully so: ever since the first goldsmith discovered that not all his customers would withdraw their bullion at once, and therefore could issue more paper claims than he had staves in his safe, managing the ratio between assets and liabilities is the central job of the banker.
“Bank Asset-Liability Management is the core of banking“
However, the goldsmith of yore had a much simpler life without complex financial instruments like synthetic derivatives on his books, regulatory requirements, and flash trades that move giant piles of money in the blink of an eye. Modern-day ALM is a highly complex business and an ever-evolving art. The guide to the subject is Prof. Choudhry. Drawing on a wide range of experience at banks like KBC, JP Morgan, and Royal Bank of Scotland, as well as academic research, Choudhry teaches his class with an engaging sense of humor and numerous anecdotes.
Silicon Valley Bank: what went wrong?
Silicon Valley Bank
The relevance of ALM is evident from two cases dominating the financial press in recent months: the failure of the Silicon Valley Bank and the takeover of Credit Suisse by UBS following a period of turmoil at the venerable Swiss bank. Both of these cases were reviewed in the program from an ALM perspective, providing the participants a clear insight into what went wrong and how they can avoid similar pitfalls in their own firms. A striking example noted by one participant was that the SVB had no Chief Risk Officer for eight months in 2022!
What also makes ALM intriguing is that it means wargaming a number of scenarios as part of the stress tests mandated by regulatory authorities. The continuous updating of the models and underlying assumptions is an intricate and interesting business, constantly in flux because of changes in the regulatory environment, incidents and structural changes in the economy.
Choudhry coaches the participants through several scenarios with various tactics and strategic tips, both in dialogue with the regulators and internally at the banks. It’s important to note though that asset-liability management isn’t solely about complying to the rules and getting through the stress test based on fictional scenarios: even banks that fall well within the margins of the regulatory framework are liable to fail when proper risk assessment lacks, as the examples of SVB and Credit Suisse prove.
Another important aspect covered in the class is that, given ALM’s central role in banking, it’s at the same time present all over the bank, yet never fully centered in one single place. There are no standardized structures, and every bank does things in a different way. It is therefore vital not to just throw up some checkpoints in the organization for regulatory compliance but to infuse the entire bank with a strong risk culture to ensure that all employees know what they can do to help with building a healthy balance sheet. This makes the ALM program relevant to employees from all parts of a bank, from the steering committees down to treasurers in smaller departments.
During the program’s off-hours, participants have plenty of time to get together and share experiences. The location of the program, DoubleTree by Hilton near Amsterdam Central Station, is also the perfect springboard for further exploring the city. Participating in the program also grants access to the AIF Alumni Network, connecting you to many professionals in the banking sector and in related fields based in Amsterdam and all around the globe.
Learn how to implement best-practice processes in the key areas of Bank Asset-Liability Management. Join this challenging 3-day program by Prof. Moorad Choudhry at Amsterdam Institute of Finance. Learn more & reserve your place here.