Regulatory evolutions are greatly expanding the responsibilities of Asset Liability Management (ALM). In recent publications¹, the Basel Committee has detailed a framework for measuring and controlling balance sheet risks. The framework puts greater emphasis on auditable processes and a more structured and standardized ALM approach (such as earning-at-risk and value-at-risk methodologies). Going forward, regulatory methodologies should come forth for evaluating bank capital adequacy for balance sheet risks.

As part of their effort to improve the comparability of Financial Statements internationally, the International Accounting Standards Board (IASB) published IAS 39². IAS 39, in fact, creates a significant operational link between ALM and how banks measure and account for their positions on their general ledger. Disclosure under IAS 39 requires that banks measure and account using ALM variables such as behavioral assumptions and fair value. IAS imposes stronger risk controls by enforcing the auditability of the ALM process by hedge qualification and documentation.

These new regulatory requirements call for ALM solutions that provide increased assurance and reliability by offering more advanced analytics housed in processes that give greater structure and enable clear auditability.

¹ Basel II: International Convergence of Capital Measurement and Capital Standards: a Revised Framework, June 2004; and

² IAS 39 is the standard: Financial Instruments: Recognition and Measurement

 *· Economic (yield curve surfaces, administered rates, discount functions, exchange rates…); market data can be input daily on an automated or manual basis
 *· Customer behavior (prepayments, renegotiations, non-performing loans, defaults, credit cards, deposits…)
 *· Structural balance sheet assumptions (equity, real-estate, reserves, asset and liability holding accounts…)
 *· New business (volume, margins...)

ALMONDE ALM SOLUTION

The Almonde ALM is a unique solution that offers the functional and technical capabilities required for meeting today's balance sheet management challenges.

The Almonde ALM delivers the following components:

 *· ALM Basic & Advanced Analytics
 *· ALM Process Management
 *· ALM Data Store
 *· ALM Reporting

The solution enables the management of interest rate, FX and liquidity risks within banks risk/return targets. Almonde facilitates sound risk management by

providing auditable and transparent processes around risk simulation, analysis,

decision-making and reporting.

Vendor Site:- Almonde