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Handbook of Asset and Liability Management: From models to optimal return strategies by Alexandre Adam

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9

Optimal Organization of an ALM Team

On ne change pas une équipe qui gagne.

9.1 THE USUAL ALM ORGANIZATION

At the beginning of the 90s, ALM teams in banks were usually integrated:

  • in Finance Departments; or
  • in Risk Management Departments.

In insurance companies, ALM teams were considered initially to be insurance risk management teams.

The position of ALM teams in Finance Departments was linked with the idea that regulatory reports were to be done by the Finance Department and that bank information systems were usually in the possession of this department.

Risk management teams were also quite often part of the Finance Department for the same reasons. When these teams were emancipated from the Finance Department some of them revived the ALM teams in their organization.

These risk management/ALM teams usually incorporated:

  • a simulation team for the computation of risk indicators;
  • a financial modelling team;
  • a product analysis team.

However, positioning ALM teams in risk management teams appeared to be very dangerous!

  • Nobody controls the risk indicator computation.
  • Hedging in risk management teams is analysed only from a theoretical point of view.
  • Risk management teams are not preoccupied by the reconciliation between risk indicators and income management.

Nowadays, ALM teams tend to be independent from Finance Departments and risk management teams.

9.2 THE OBJECTIVES OF ALM

ALM teams now have a set of responsibilities. The ALCO (the ALM committee) – pays attention to ...

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