ALM
Definition
Asset and Liability Management. The practice of managing balance sheet risks including interest rate, liquidity, and funding risk.
What This Actually Means
The discipline of ensuring your assets and liabilities are structured so the bank can meet its obligations, maintain stable earnings, and preserve economic value across different rate and liquidity environments. ALM sits at the intersection of treasury, risk, and finance.
Where It Matters
ALM is where IRRBB management actually happens. The ALM team (or treasury) builds the models, runs the scenarios, proposes the hedges, and monitors the risk positions. The quality of your ALM function — its data, its models, its people — determines the quality of your IRRBB management.
The discipline of managing the mismatch between assets and liabilities.