skip to main navigation skip to secondary navigation skip to content
Board of Governors of the Federal Reserve System
skip to content
Board of Governors of the Federal Reserve System

International Training & Assistance (ITA)
for Bank Supervisors

Principles of Asset/Liability Management SeminarFederal Reserve System Courses

Type of Participant Targeted

The Principles of Asset/Liability Management (PALM) Seminar is designed for safety and soundness bank examiners. It should be taken in examiners' careers when they begin to assess and evaluate asset/ liability management (ALM) activities and the market-risk sensitivity of financial institutions as a part of their routine job function.

Prerequisites

Participants should have a general understanding of intermediate financial concepts--similar to that achieved in junior or senior level economics and finance classes. This background should include familiarity with futures, forwards, swaps, and options; duration; and intermediate balance sheet analysis. Participants are encouraged to check their proficiency by reviewing the background papers provided as pre-course supplementary course materials.

Course Overview

PALM provides an in-depth exposure to ALM, concepts, and methodologies as they apply to a financial institution's banking book--non-trading assets and liabilities. (Trading assets are addressed in a companion class, the Market Risk Analysis Seminar.) The materials covered in PALM will enable participants to identify and draw conclusions about interest rate, investment, and liquidity-risk issues they will encounter while examining financial institutions. The course contains a case study based on an intermediate-sized U.S. commercial bank. The case study is used to illustrate and reinforce the balance sheet ALM concepts presented in the lectures. This 4-1/2-day course has no pre-course work, although background papers on various subjects are provided.

Course Objectives

This program is designed to give participants a broad overview of the basic principles of ALM, including

  • Interest-rate risk
  • Investment portfolio management
  • Liquidity risk
  • Balance sheet hedging
  • ALM model risk management

The class will also provide participants with a basic understanding of

  • How financial markets determine interest rates
  • How changes in interest rates can affect the risk posture and profitability of financial institutions
  • What tools are available to measure interest-rate risk and liquidity risk
  • Why and how institutions use certain products to manage their interest-rate risk and liquidity risk

Return to topReturn to top

Last update: February 7, 2014