Independent Banker - August 2023 - 58

PREFERRED
PERSPECTIVES
Alm today, growth tomorrow
Proactive risk management in uncertain times
Joe Sass, SVP, Risk
and Performance, FIS
From bank runs to unrealized
losses, banks in 2023 are
facing growing risks to their
deposit books and investment
portfolios. And the more
uncertainties they face, the
more certainty they need from
risk management.
In these unpredictable times,
it's critical to know how every possible scenario could
affect the balance sheet in the future - and that your
bank could take the hit. So, in the wake of recent
bank closures, new approaches to managing current
risks - and testing the effects of further stresses - are
increasingly key to survival and growth.
ALM matters more than ever
Asset-liability management (ALM) plays a pivotal role
in reducing the impact of risk on the balance sheet. As
part of a compliance framework, it also helps banks
meet their regulatory obligations for maintaining
adequate levels of liquidity, funding and capital.
But ALM has another essential function: it allows risk
managers to pre-empt change, evaluate options, reassess
risk appetite and really understand the balance
sheet.
In today's precarious financial environment, it's even
more vital that risk managers look beyond the rules and
consider every possibility the future of banking could
hold.
That way, banks can continually assess where problems
can surface before they actually become real or impact
the balance sheet.
A new age of proactive ALM
Whether your problems are affecting your deposit
books, bond portfolios or commercial real estate, it
pays to know your potential exposure under different
scenarios - whatever happens in the future. And
because the future's looking so uncertain, you'll need to
use your imagination to cover all conceivable bases.
In early 2022, very few risk managers were testing the
impact of a 500-point rate rise on their balance sheet;
now, nothing can be taken for granted. Inflation likely
won't get worse from here, but we certainly can't rule
out the possibility.
So, for optimal ALM, it makes sense to keep analyzing
the effects of both hikes and falls in interest rates, along
with a wide range of other potential stresses.
How to proactively manage today's balance sheet
risks
Whatever risks your balance sheet faces, get a handle
on your exposure in seven pre-emptive steps:
1. Know your customers
Many banks currently face a slow but steady leakage
of deposits. A 360-degree view of your customers and
their deposits will help you build a deposit strategy that
ensures a more stable source of funding.
2. Add brand value
To make sure your savers stick with you, you need to
show you're there for them. Drive engagement and
loyalty through closer relationships and meaningful
support - and make it easy for consumers to find you,
whether on social media or in a branch.

Independent Banker - August 2023

Table of Contents for the Digital Edition of Independent Banker - August 2023

Contents
Independent Banker - August 2023 - Cover1
Independent Banker - August 2023 - Cover2
Independent Banker - August 2023 - Contents
Independent Banker - August 2023 - 2
Independent Banker - August 2023 - 3
Independent Banker - August 2023 - 4
Independent Banker - August 2023 - 5
Independent Banker - August 2023 - 6
Independent Banker - August 2023 - 7
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