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The Role of ALM in Financial Institutions

Introduction to Treasury: The Role of ALM in Financial Institutions Asset and Liability Management (ALM) plays a pivotal role in financial institutions, acting as a strategic compass for navigating the turbulent waters of financial markets. At its core, ALM is concerned with striking a balance between a bank's assets, like loans and securities, and its liabilities, such as deposits, in terms of both volume and duration. By doing so, it safeguards the institution against liquidity risks and interest rate fluctuations, which could erode profitability or even threaten solvency. In an era where global financial markets are intricately linked and economic conditions can change swiftly, the art and science of ALM become paramount. It acts as both an anchor, ensuring institutions don't drift into treacherous waters, and a sail, helping them capture windfalls in favourable conditions. #banking #alm