Bank Asset and Liability Management

FOREWORD (Bank endorsement)

PREFACE

Part 1: Asset and Liability Management

Chapter 1: Managing Bank Profitability

Learning Objectives

Introduction

1.1 Banking structure and regulation

1.1.1 Mandatory financial disclosure on banks

1.2 Bank financial statements

1.2.1 Income and profit

1.2.2 Off balance sheet items

1.2.3 Non-financial information

1.3 Evaluation of bank profits

1.4 Measuring bank profitability

1.4.1 Interest and non-interest revenues/expenses

1.4.2 Cost of funds, return on equity, return on assets and net interest margin

1.4.3 Different approaches to balance sheet management

1.4.4 Accounting profit vs. economic profit

Summary

List of key terms

Study guide (five questions)

Further reading/websites

Chapter 2: Asset and Liability Management Committee

Learning Objectives

Introduction

2.1 The role and functions of Asset and Liability Management Committee (ALCO)

2.1.1 Asset and liability management

2.1.2 Liquidity and funding risk management

2.2 ALCO plan development

2.3 ALCO pack

2.3.1 Financial ratios

2.3.2 Influence for market strategy

Summary

List of key terms

Study guide (five questions)

Further reading/websites

Chapter 3: Managing Bank Assets and Liabilities

Learning Objectives

Introduction

3.1 Managing bank assets

3.1.1 The loan portfolio

3.1.2 The investment portfolio

3.1.3 Securitization

3.1.4 Liquidity management - assets

3.2 Managing bank liabilities

3.2.1 Sources of funds

3.2.2 Deposit structure

3.2.3 Impact of interest rate changes on net interest spread

3.2.4 Liquidity management - liabilities

Summary

List of key terms

Study guide (five questions)

Further reading/websites

Chapter 4: Banking Regulations

Learning Objectives

Introduction

4.1 Banking regulation and the role of the central monetary authority

4.2 Roles of HKMA

4.2.1 RTGS

4.2.2 Intra-day repo

4.2.3 Discount window

Summary

List of key terms

Study guide (five questions)

Further reading/websites

Part 2: Managing Liquidity Risk and Interest Rate Risk

Chapter 5: Capital and Liquidity Management

Learning Objectives

Introduction

5.1 Definitition and functions of capital, standards of capital adequacy under Basel II/III

5.1.1 Measurement of capital adequacy

5.1.2 Tier 1 (Core) and Tier 2 (supplemental) capital requirements, capital planning

5.2 Determining a bank’s funding needs

5.2.1 Meeting legal reserve requirements

5.2.2 Loan and deposit trend forecasts

5.2.3 Liquidity gap estimation

5.2.4 Liquidity planning

5.3 Stress testing

5.3.1 Capital and liquidity management policies

Summary

List of key terms

Study guide (five questions)

Further reading/websites

Chapter 6: Managing Interest Rate Risk

Learning Objectives

Introduction

6.1 Types of interest rate risk

6.2 GAP analysis

6.3 Duration analysis

6.4 Basis point value (BPV)

6.5 Hedging interest rate risk

6.6 Syndication capital management

6.7 Securitization

6.7.1 Liquidity management

6.7.2 Asset management

6.7.3 Capital management

6.8 Net interest income sensitivity analysis

Summary

List of key terms

Study guide (five questions)

Further reading/websites

Chapter 7: Long Term Market Risk

Learning Objectives

Introduction

7.1 Long term risks

Summary

List of key terms

Study guide (five questions)

Further reading/websites

Glossary

Index