LAFL defines its treasury management activities as the management of its cash flow, its banking, money market and capital market transactions. The effective management and control of risks associated with those activities, and the pursuit of optimum performance consistent with those risks. LAFL regards the successful identification, monitoring and control of treasury risk to be the prime criteria by which the effectiveness of its treasury management activities should be measured. Accordingly, the analysis and reporting of treasury management activities focuses on their risk implications for LAFL.
Assets Liability Management
Asset-Liability Management (ALM) refers to the management of the portfolio of assets and liabilities to maximize profitability and stockholders’ earnings over the long term, consistent with safety and liquidity considerations.
The Asset-Liability Committee (ALCO) consisting of the senior management including the CEO should be responsible for ensuring adherence to the limits set by the Board as well as for deciding the funding strategy of the company in line with the LAFL’s budget and decided risk management objectives and risk tolerance limits.
The ALM desk consisting treasury department officers headed by Treasury Head should be responsible for analyzing, monitoring, and reporting the risk profiles to the ALCO. ALM desk is responsible for the preparation of forecasts showing the effects of various possible changes in market conditions related to the balance sheet and recommend the action needed to adhere to policies and guidelines for approval by ALCO.
Responsibilities of ALM Desk
To keep records of ALCO meetings, to monitor the implementation status of the actions taken in ALCO meetings
To provide daily market information on the money market and government securities market.
To provide daily fund position report.
To provide weekly IPO investment and other investment reports.
To provide analysis of peer NBFIs and Banks to ALCO
To provide market interest rate analysis to ALCO for deposit/asset interest rate decision making.