25 years: Treasury & ALM
A bank’s Asset-Liability Committee or ALCO is possibly the most important executive operating committee in a bank. Here, Moorad explains what ALCO is, outlines their responsibilities and provides some insight into their objectives and governance structure.
A bank’s Asset-Liability Committee or ALCO is possibly the most important executive operating committee in a bank. Here, Moorad explains what ALCO is, outlines their responsibilities and provides some insight into their objectives and governance structure.
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11 mins 28 secs
The role of a bank’s Asset-Liability Committee ultimately lies in managing the bank’s balance sheet and ensuring that the balance sheet shape and structure are robust and long-term viable.
Key learning objectives:
Define an ALCO
Outline the main responsibilities of an ALCO
Understand what the ideal ALCO governance structure looks like
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The principle indicators are summarised in the monthly pack. It is the key bank risk report. It presents aggregate-level market risk liquidity and capital information. The preparation of this report is the responsibility of the “middle office” in banks. Ultimately it should be prepared within the Treasury department.
Generally, ALCO reporting packs employ a red-amber-green “traffic light” for each risk metric.
A bank operating in a multinational environment, in which overseas entities are subsidiaries or associated legal entities rather than branches, should organise its governance via regional or legal entity ALCOs. This is then a Group ALCO - GALCO that reviews matters at the group level.
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