Asset and liability management

Asset and liability management is primarily concerned with managing the structure of a financial institution’s balance sheet so as to control exposure to interest rate risk and liquidity risk. Banking supervisors describe interest rate risk in the banking book as the risk to a bank’s capital and earnings arising from adverse movements in interest rates that affect assets, liabilities, and off-balance-sheet positions. In practice, ALM also supports liquidity planning by helping institutions manage the maturity structure of funding and assets. The Basel III framework states that the Net Stable Funding Ratio was developed to promote a more sustainable maturity structure of assets and liabilities over a one-year horizon, which is closely linked to asset and liability management practice. ==See also==