In Banking, asset-liability management (ALM) encompasses a wide range of activities of varying degrees of complexity. It is high-level management of bank’s assets and liabilities with an objective to increase the value of the bank’s capital and assets. So, ALM is important for every bank.
The principle function of Asset-liability management desk is to management Liquidity risk and Interest rate risk. However, it will also set the overall policy for credit risk and credit risk management.
Effective management of Bank’s assets and liabilities maximizes the risk-adjusted returns to shareholders over long run. So, it is one of the important tool used by banks for effective for risk management.
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