A three-part learning journey
How can a bank lend for years while depositors may want their money sooner? Explore the business logic, financial statements and management process behind resilient banking.
New subtopics in the learning path
| Lesson | Additional subtopics |
|---|---|
| Introduction | Bank intermediation; liquidity vs solvency; mismatch map; customer behaviour; treasury and risk roles |
| Financial statements | Sources and uses; stock-flow bridge; amortisation; provisions; equity measures; ROE and cost of equity |
| ALM process | Data requirements; contractual and behavioural ladders; scenario balance sheets; FTP; stress; collateral; validation; ALCO action log |
What you will learn
| Lesson | Learning outcome |
|---|---|
| Introduction | Distinguish liquidity, repricing, currency and economic-value exposures. |
| Financial statements | Read a bank’s balance sheet and income statement; calculate NII, NIM, ROA and ROE. |
| ALM process | Build a gap ladder, interpret rate sensitivities and translate ALCO analysis into action. |
Materials used to expand this series
Selected relevant sections were reviewed and synthesised into original explanations and new examples. The source books and notes are not reproduced.
| Material | Reviewed section / use |
|---|---|
| Moorad Choudhry: An Introduction to Banking, Liquidity Risk and Asset–Liability Management (2011) | Chapter structure; ALCO policy and reporting, Chapter 7, printed pp. 224–229 |
| Moorad Choudhry: An Introduction to Banking, Principles, Strategy and Risk Management, 2nd edition | Chapter 1 business model, strategy, capital and financial statements |
| Jean Dermine and Youssef F. Bissada: Asset & Liability Management (2002) | Value creation, ROE and Stage 5 transfer-pricing discussion |
| ALM NOTES: Chapter 7, Asset Liability Management Risk | Financial statements, ALCO, liquidity gaps, amortisation and balance-sheet scenarios |
| Asset Liability Management: Compiled Practical Resources | Kallur’s CRO perspective, governance, FTP, policy and contingency funding |
| CAIIB PAPER 2 | Selected banking statements and coordinated balance-sheet management; historical definitions reviewed critically |
| Gurnani: Asset Liability Management In The Banks | Two-page conceptual overview; historical buckets not treated as current requirements |
| Handbook of Asset and Liability Management upload | Seven-page contents extract only; used as a reading map |
| RBI_2008-09_ | Historical FX circular; scope and date distinguished from current ALM requirements |
Sources and further reading
Regulatory sources support the concepts; requirements differ by jurisdiction and bank category. Check amendments and commencement provisions before applying a rule.
- RBI: Commercial Banks – Asset Liability Management Directions, 2025 — liquidity governance, intraday liquidity, LCR, NSFR and interest-rate risk.
- Basel Framework — LCR, NSFR and IRRBB; SRP98 application guidance explains earnings and economic-value perspectives.
- Federal Reserve: SR 10-6, Interagency Advisory on Interest Rate Risk Management.
- EBA: Guidelines on IRRBB and CSRBB (EBA/GL/2022/14).
Recommended academic reading
The following bibliography was supplied for this series. The full books were not available for direct consultation; no chapter or page claims are made.
- Joël Bessis (2015), Risk Management in Banking, 4th edition, Wiley — recommended for integrated banking risk, liquidity and interest-rate risk.
- Dimitris N. Chorafas (2002), Asset/Liability Management for Banking Institutions, Elsevier — recommended for ALM measurement and balance-sheet modelling.
- Andrea Resti and Andrea Sironi (2007), Risk Management and Shareholders’ Value in Banking, Wiley — recommended for risk measurement, value and capital allocation.
Continue learning
- 1. Introduction to Asset Liability Management in Banks
- 2. Understanding Banks’ Balance Sheet and Income Statement
- 3. ALM Process
Educational illustrations use fictional data. Prof. V. Ravichandran · The Mountain Path Academy.