International Training & Assistance (ITA)
for Bank Supervisors
Principles of Asset/Liability Management SeminarFederal Reserve System Courses
August 13 - August 17, 2012 (Washington, D.C.)
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 supplementary course materials. Also suggested is a review of the STaRT Asset Liability Management Module (see pages 11-12).
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 available.
Course Objectives
This program is designed to give participants a broad overview of the basic principles of ALMt, including
- Interest rate risk
- Investment portfolio management
- Liquidity risk
- Balance sheet hedging
- ALM model risk
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 profi tability of financial institutions
- What tools are available to measure an institution's interest-rate risk and liquidity exposures
- Why and how institutions use certain products to manage their interest-rate risk and liquidity exposures
Class Size
The minimum number of participants is 16 and the maximum is 30.