Euromoney Audit Training

A 4–day course on asset liability management best practices and applications

• Managing net interest income at risk in banking books
• Interest rate gaps vs. value at risk - when to use which measure for risk measurement
• Transfer pricing mechanisms in commercial banks
• Liquidity management and interest rate management in modern bank treasuries
• Modelling customer behaviours in replicating portfolios
• Allocating regulatory capital and Basel II considerations
• New regulatory impetus governing liquidity risk (‘Basel III’)
• Case studies drawn from leading global financial institutions

The course includes a management simulation that helps delegates practice the concepts discussed during the programme.

Who should attend:

• Group Treasurers
• Accounting & Finance Managers
• Asset Liability Managers
• Liquidity Managers
• Risk managers & Risk controllers
• Auditors & Bank Regulators

Asset Liability Management - Best Practices Course Documents:

This four day seminar aims to explain treasury asset liability management techniques and provide an introductory overview of modern bank treasury operations. While the nature and scope of treasury activities may be different from one banking organisation to another, they all hinge upon the treasury´s inheritance of the company´s financial balance sheet (and often off balance sheet positions) – which it safeguards for liquidity and interest/currency exchange risks. The case studies are derived from experiences in treasury operations of large, multi-national money centre banks. The customer groups encompass retail and institutional borrowers such as mortgage holders as well as depositors. This course will analyse how a modern treasury performs its responsibilities ranging from liquidity and liability funding to managing the firm´s banking book(s) – termed as “asset liability management” in industry jargon.

Day 1

Introduction to ALM

• Banking books vs. trading books
• Interest rate risk in treasury banking books
• Liquidity risk
• Funds transfer pricing
• The case for scale economies and skill centralisation
• Identifying economic value added of customer banking businesses
• Product & customer profitability controls

The treasury business remit

• The treasury “banking books”: net interest income generation (with/without customer margin)
• Liquidity risk (internal lender of last resort)
• Re-pricing risk (interest rates, FX) – gap analysis
• Maturity mismatch risk & the dynamics of liquidity gaps
• ST (MT & LT) funding & securing of contingent funding/liquidity sources
• Modelling (replicating) customer assets & liabilities: “the model books”
• The maturity mismatch and “riding the yield curves”
• Regulatory compliance & rating safeguarding
• Counterparty default & settlement risks

Management of a customer banking book

• Hedging risks with “macro-swaps”
• Basis risks in banking books
• Duration of fixed income equity

Case study: hedging re-pricing risks with constant maturity swaps

Day 2

Modelling interest rate risk

• Deterministic vs. stochastic models
• Equilibrium vs. “no arbitrage” models
• Yield curve bootstrapping & interpolation
• Scenario analysis

Treasury philosophies beyond liquidity providers of last resort

• Profit centres: NII producers
• Service centres: margin stability providers
• Repricing gaps vs. DV01/duration – case study
• Liquidity gaps – case study
• Managing asset liquidity
• Stress testing deposit “stickiness”- case study
• Accounting for treasury books: IFRS
• MtM vs. “available for sale” vs. held to maturity” books
• Accrued vs. MtM Accounting Standards – link to financial accounting for net interest income
• Regulatory compliance – liquidity
• Replicating portfolios & margin stabilisation
• Core assets/liabilities
• Volatile assets/Liabilities
• Modelling volume elasticities – best practices

Case study: Static replication of OTC products via exchange traded products

Day 3

Risk management in treasury operations

• Market risks & VAR
• Basel II, pillar 2 impacts
• Credit & counterparty default risks
• Operational risks
• Funding liquidity risk
• Cashflow profiles
• Forecasting & modelling cashflows
• Asset liquidity risk & liability liquidity risk
• Best practices risk management standards
• Modelling customer behaviour – model risks
• Stress testing in ALM books
• Risk mitigation – application of derivatives

Case studies: Bank liquidity crises

Day 4

Effective risk governance

• Defining risk appetite (case study)
• Establishing risk limits – best practices
• Risk MIS
• Effective risk policies: responsibilities 6 organisational consequences

Contingency planning for liquidity

• Lessons learned from the financial crisis
• The role of internal & external auditors

Integration of ALM within firm-wide risk management

• Congruence with corporate strategy
• Business unit steering through effective ALM (case discussion)

Group portfolio management and impact on ALM

• Managing correlations – case study

Concluding remarks & discussion

• Andre Horovitz

  In over 20 years of financial services experience, Andre Horovitz has gained insights into industry best practices of some of the leading financial institutions in the world.
  
  Andre started his banking career at Lehman Brothers as an Investment Banking Associate in 1988. He was responsible for pricing, developing hedging strategies and marketing exotic interest rate derivatives. 
  
  He has subsequently held senior executive positions at Oliver, Wyman & Co., Commerzbank, HVB Group (currently part of Unicredit), Erste Bank, Credit Suisse and Nagler & Company.
  
  At Erste Bank and Credit Suisse, Andre held the positions of Chief Risk Officer and was a member of the top management committees of the respective institutions.
  
  He is a frequent speaker at various risk management conferences and a contributor to various industry journals. He has held teaching assignments in financial risk management at the Technical Universities of Munich and Vienna. 
  
  Andre has been training banking executives for over 8 years via engagements with prestigious organisations and has lectured on a variety of risk management related topics at all levels (introductory to advanced). His areas of expertise cover all classes of financial risk management, including the important link to overall institutional strategy.
  
  As an instructor, he is known for combining the theoretical underpinnings of financial risk management methods with real life practical case studies drawn from his working experience as a risk management executive. He likes to motivate course attendees to develop practical and implementable solutions to problems via practical case studies.
  
  Andre holds a Diploma in Hydraulics Engineering from the Technical University of Bucharest and an MBA in Finance from New York University´s Stern School of Business. He is a Licensed Professional Engineer in New Jersey and Michigan, a Registered Securities Representative in New York and a GARP (“Global Association of Risk Professional”) certified Financial Risk Manager (“FRM®”).

  Courses run by this instructor

  • Measuring, Managing and Mitigating Counterparty Risk - Dubai

Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.

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