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The top 10 2022 ALM resources for financial institutions

Kate Stoneburner
December 23, 2022
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Blog posts to help your asset/liability management (ALM) staff strategize for the future

These ALM posts were the most popular in 2022. Our top ten blogs were created by Abrigo's team, which includes former bankers, regulators, and industry experts.

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Complimentary ALM guidance

Expert advice for shoring up your institution's ALM model

In the past year, financial institution decision-makers faced choices for effectively managing their institutions in the wake of changing economic landscapes, investment markets, interest rates, customer demand, mergers, acquisitions, and pandemic aftereffects. Navigating a rising-rate environment, leveraging core deposit strategies, and pricing loans effectively were top of mind for asset/liability management (ALM) staff in 2022. 

A review of Abrigo’s most popular ALM blogs over the last 12 months shows that the most popular blogs described ways to shore up the foundation of an institution’s ALM model. Deposit management strategies and deep dives into interest rate risk came in a close second.  

The following are Abrigo’s 10 top ALM blogs in 2022: 

For rookies and experts

Top helpful resources for ALM staff

Click on the link next to the number to access each resource.

ALM goals and approaches

The first installment of a five-part series, this ALM introduction blog covers the basics of developing a sound and robust ALM model. The article is intended for the ALM rookie who wants to understand ALM basics: the process and its usefulness. It begins by outlining and answeringfour of the most common questionsabout asset/liability management that Abrigo's ALM consultants hear and then moves on to goal-setting and ALM management approaches. 

Effective model risk management and model validation

Model risk management (MRM) is a framework of systemic oversight of the models a financial institution or organization relies on for financial reporting, decision-making, and other critical purposes. As financial regulators have noted, this oversight is important because of the potential for long-term complications in financial loss when models such as CECL models or ALM models are misused or incorrect. The blog considers the potential consequences of using incorrect or misapplied models to conduct stress testing, assess capital adequacy, estimate credit losses, or monitor and manage high-risk customers. It then outlines what an effective MRM function should look like. 

 

Interest rate risk and earnings at risk

While the first post of this series gives a general outline, this second installment defines a key component of effective ALM: managing interest rate risk. With a focus on explaining interest rate risk and how to measure it, the blog reviews two approaches--measuring short-term IRR by looking at changes to the income statement and measuring long-term IRR, which looks at changes to the market value of the institution's capital. Read for a review of methods FIs use to measure short-term risk.

Rate hikes and deposit management strategy

The Federal Reserve signaled at the beginning of 2022  that it would start raising interest rates in March 2022, generating a collective high-five throughout the banking industry. Bankers were poised and waiting for interest rates to rise and counting on reaping the rewards of an asset-sensitive balance sheet. This blog can help bankers plan properly for ALM strategy in a rising rate environment by understanding the makeup and behavior of depositors over time through various cycles. 

IRR and value at risk

Interest rate risk can also be measured by considering a longer-term horizon than the short-term focus explained in Part 2 of this series. This third ALM 101 post describes value at risk (VAR), also known as the economic value of equity (EVE) risk, for measuring the potential changes to the market value of the institution’s capital caused by interest rates.  Both short- and long-term measurements can measure earnings performance but using both approaches provides a holistic view of the risk present in an institution’s portfolio.  

 

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Liquidity risk

Regulators expect banks and credit unions to maintain adequate levels of liquidity. They must meet both expected and unexpected cash flow and collateral needs without adversely affecting daily operations or financial performance. Read the blog to learn how to evaluate cash flows in and out of your institution in order to manage liquidity and meet all regulatory requirements effectively 

Non-maturity deposits

Many institutions have a natural hedge to changing interest rates: their non-maturity deposits. But as the last few years have shown, non-maturity deposits can fluctuate dramatically in a short timeframe. Core deposit analysis can address several challenges associated with developing assumptions for non-maturity deposits. This last blog of the ALM 101 series explains how improved assumptions allow management to improve models and fund institutional assets appropriately with non-maturity deposits. 

Reading between the lines of a core deposit study

Across the banking industry, views on the importance of regularly conducting a core deposit study vary greatly. Many financial institutions update their study every four to five years. Others are on top of the data every year. This blog dives into the reasoning behind such a variation in approaches and how financial institutions can become more strategic about utilizing the wealth of information that a good core deposit study can uncover. From updating assumptions in the ALM process to product development, leveraging your institutions study results can improve risk management. For more analysis of core deposits for risk management and loan growth, stream this webinar.

Effective loan pricing in today's environment

While bankers might have hoped the close of 2021 would also bring an end to the low yields, financial institutions continued to face the impacts of both challenging rates and the pandemic. As a result, effective loan pricing is more imperative than ever for banks and credit unions. This blog analyzes the relationship between margins, cost of funds, and performance. It also explains four factors behind lower yields at some institutions. Finally, the blog describes options for institutions when net interest margins are squeezed. For more on banking in a rising rate environment, watch this panel discussion.

Loan betas: a key ALM assumption

Loan betas, or how rates for new and repriced loans will act as interest rates rise, are critical ALM inputs for net interest margin forecasts. In prior rising-rate environments, inaccurate loan betas have led to net interest margin gains falling short of ALM model projections. Read the blog to learn about the many factors contributing to this phenomenon and what experts predict for the future. 

Learn more about best practices for loan pricing during a rising-rate environment

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About the Author

Kate Stoneburner

Content Marketing Manager
Kate Stoneburner is a Content Marketing Manager at Abrigo, where she works with industry thought leaders to create digital content that helps financial institutions better serve their customers. Before joining Abrigo, Kate managed social media and produced articles for Campbell University’s quarterly magazine and other university content initiatives. She earned

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Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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