Treasury Management Roles

Navigating ALM Auditing: Insights from Basel III I recently received an intriguing question from a LinkedIn contact, which I believe could benefit many in our professional community. The question was: "I am auditing Asset-Liability Management (ALM) for my bank. Can you provide any insight on what I can review from a Basel III perspective?" Asset-Liability Management (ALM) is a crucial component of a bank’s operational strategy, focusing on managing risks that arise due to discrepancies between assets and liabilities. From a Basel III perspective, there are several key areas that you should consider when conducting an ALM audit: 1. Liquidity Coverage Ratio (LCR): Basel III introduced the LCR to ensure that financial institutions possess an adequate level of unencumbered, high-quality liquid assets that can be converted into cash to meet their short-term obligations. During your audit, assess whether the bank maintains the required LCR, which reflects its ability to withstand potential liquidity disruptions over a 30-day horizon. 2. Net Stable Funding Ratio (NSFR): The NSFR is another critical metric under Basel III, designed to promote a more stable funding profile in relation to the composition of assets. It measures the amount of available stable funding relative to the required stable funding over a one-year period. Reviewing the NSFR can provide insights into the long-term structural liquidity of the bank. 3. Interest Rate Risk in the Banking Book (IRRBB): Basel III guidelines also focus on the management of IRRBB. This involves reviewing how changes in interest rates affect the bank’s net interest income and the economic value of its equity. Ensure that the bank uses robust models to measure and manage this risk, and that it aligns with the Basel standards. 4. Stress Testing and Scenario Analysis: Basel III emphasises the importance of stress testing to assess the resilience of banks under adverse conditions. Ensure that the bank conducts regular stress tests that consider various scenarios, including those related to liquidity and market risks. These tests should help identify potential impacts on the balance sheet and inform strategic adjustments. 5. Compliance with Capital Requirements: Lastly, verify that the bank adheres to the Basel III capital requirements, which include higher quality capital bases and enhanced buffers. These requirements are essential for strengthening the bank’s overall risk management framework. By focusing on these aspects, you can gain a comprehensive view of how well the bank is positioned to manage its assets and liabilities in line with Basel III regulations. This not only ensures regulatory compliance but also enhances the bank's stability and performance.

Gap Analysis in ALM — If You Want a Seat at the Treasury Table, Master This First Finance students who aspire to senior roles in bank treasury management must understand and master Gap Analysis. There is no shortcut. This is the language that ALCO committees speak, that regulators examine, and that bank treasurers use to make decisions worth billions every day. Banks borrow short and lend long. Deposits can walk out tomorrow. Loans stay for years. That mismatch is both the source of bank profitability and the source of bank failure. Gap Analysis makes this mismatch visible, measurable, and manageable. I have put together a comprehensive, open-source learning package on Gap Analysis in Asset Liability Management — freely available on GitHub. The package includes: A fully worked Excel model (5 sheets) built around a $95 billion sample bank — Assumptions, Liquidity Gap, Rate Sensitivity Gap, NII Impact, and Dashboard. Every formula is transparent. Plug in your own data and the analysis updates automatically. A 23-page LaTeX PDF reference covering theory, formulas, Basel III / RBI regulatory context, worked examples, and strategic interpretation with diagrams and illustrations. An interactive Streamlit web application — 6 pages walking through the analysis step by step, from balance sheet inputs to a consolidated ALM dashboard with regulatory threshold checks, a rate shock simulator, and a 30-question knowledge base. https://lnkd.in/gby-2brF From the case study: the cumulative liquidity gap reaches negative $6.1 billion at the one-year mark (6.4% of total assets, within RBI's 15% limit). The bank is asset-sensitive with a 1-year rate gap of $3.6 billion — a 200bps rate rise adds $72 million to NII. RSA/RSL ratio of 1.06x sits within the 0.80x–1.20x prudent range. NII at Risk is just 0.45% of equity against a 5% threshold. These are not academic exercises. Every ALCO meeting, every bank treasury, every regulatory submission uses exactly these concepts. If you are preparing for FRM or CFA, studying for your MBA, or building a career in banking risk — start here. Everything is here: https://lnkd.in/gWxu2Khs The Mountain Path Academy — World of Finance https://lnkd.in/gyyiGxjC #ALM #AssetLiabilityManagement #LiquidityRisk #InterestRateRisk #GapAnalysis #BaselIII #IRRBB #RBI #ALCO #BankTreasury #FRM #CFA #RiskManagement #FinanceEducation #TheMountainPathAcademy

Asset-liability mismatch is one of the biggest risks life insurers face. If you're writing annuities or fixed-term investment products, a robust ALM framework isn't optional; it's essential. My latest article, Building effective ALM frameworks: A practical guide for emerging annuity providers, is aimed at insurers still building or strengthening their ALM capabilities. It introduces a maturity model to benchmark your current approach and offers clear, practical steps to improve. Regulators across Africa are taking ALM more seriously: - In Nigeria, NAICOM’s new rules now require quarterly ALM reporting and actuary sign-off for annuities. - Kenya has experienced large swings in interest rates. A tough test for any insurer’s balance sheet. And in South Africa, with global political uncertainty and growing concerns over sovereign debt, understanding and managing your exposure to yield shocks is more critical than ever. 🔗 Web links in first comment below #ALM #InsuranceRisk #Annuities #Actuarial #LifeInsurance #NAICOM #NigeriaInsurance #KenyaInsurance #SouthAfrica #AssetLiabilityManagement

Zoomcar has just announced a significant step towards financial stability by restructuring its debt. This move is aimed at reducing their outstanding debt and ensuring long-term sustainability. But, what’s the significance of doing this? Debt restructuring can be a game-changer for companies facing financial challenges. Here’s why: 📌 Improved Cash Flow: By renegotiating the terms of their debt, companies can reduce immediate cash outflows, allowing them to allocate resources more effectively towards growth and innovation. 📌 Enhanced Financial Stability: Restructuring helps in stabilizing the financial health of a company, making it more attractive to investors and stakeholders. This stability is crucial for maintaining trust and confidence in the business. 📌 Strategic Investments: With reduced debt obligations, companies can invest in strategic initiatives that drive long-term value. This could include expanding product lines, entering new markets, or enhancing technological capabilities. 📌 Operational Flexibility: Debt restructuring often comes with more favorable repayment terms, providing companies with the flexibility to manage their operations without the constant pressure of looming debt repayments. 📌 Stakeholder Confidence: Successfully navigating debt restructuring can boost the confidence of stakeholders, including employees, customers, and partners. It demonstrates a commitment to financial responsibility and long-term success. For entrepreneurs and business leaders, understanding the intricacies of debt restructuring is essential. It’s not just about managing debt; it’s about positioning your company for sustainable growth and resilience. What are your thoughts on debt restructuring? #DebtRestructuring #FinancialStability #BusinessStrategy #CorporateFinance

Struggling to understand the gaps in your financial results? Adding the cost component to a price-volume mix analysis will give you a broader picture of those gaps. Variance Analysis, sometimes referred to as Budget vs. Actual Analysis or Performance Gap Analysis, is a powerful tool to understand the differences between your budgeted and actual financial performance. This breakdown helps you pinpoint where things went right and where adjustments are needed. Here’s an example: ➡️Volume Increase: Higher volume boosted revenue by $60,000. ➡️Price Drop: A lower sales price cost us $300,000. ➡️Variable Costs: Higher variable costs led to an additional $60,000 expense. ➡️Fixed Costs: Slight increase in fixed costs added $10,000. In the end, we landed at $190,000 against our budget of $400,000. Identifying these variances allows us to strategize better and make informed decisions. This comprehensive approach helps us understand the impact of each factor on our financial performance. Grab the template here: https://buff.ly/3z7htAQ

🌟 **Why I’m Sharing My ALM Modeling Knowledge** 🌟 After 15 years in Bank Treasury Asset-Liability Management (ALM), I’ve decided to publicly share insights on IRRBB, deposit modeling, liquidity stress testing, and more. Here’s why: **Bridging the Gap Between Theory and Practice** Throughout my career, I’ve observed a critical disconnect: while treasury teams rely on software to project NII and EVE metrics, many struggle to balance *repricing risk* (short-term earnings) with *duration risk* (long-term economic value). This “black box” approach can obscure strategic decision-making, especially when assumptions or model limitations aren’t fully understood. **My Goal? Practical Clarity.** ALM isn’t just about outputs—it’s about asking the right questions: - How do deposit behaviors impact risk exposure in rate shocks? - What level of model granularity is truly actionable? - Are stress tests aligning with strategy or just compliance? I’ll share examples from my experiences to demystify technical concepts and highlight how models translate to real-world balance sheet management. **Looking Ahead** If time allows, I aim to compile these insights into a **practical ALM handbook**—a resource focused on empowering teams to leverage models strategically, not just operationally. **Let’s Connect!** If you work in treasury, risk, or ALM and want to: ✓ Move beyond software outputs to mastering model *insights* ✓ Balance regulatory requirements with strategic risk oversight ✓ Discuss IRRBB, deposit decay, or prepayment modeling Together, we can build a more informed, empowered ALM community. 💡 *What ALM challenges resonate most with you? Share below!* #ALM #TreasuryManagement #IRRBB #RiskManagement #Banking

❓ How can countries with very high domestic debt avoid big financial problems and keep their economies stable? 👏 Congratulations to my dear colleagues in the IMF Debt Capital Markets Division Eriko Togo, Hui Miao, Shijia Luo, Myrvin Anthony, Marie Kim and Joe Kogan who worked hard to bring this IMF Working Paper on Domestic Debt Restructuring (DDR) to conclusion ahead of the IMF-World Bank 2025 Annual Meetings. In the WP they study seven domestic debt restructuring experiences: Argentina, Ghana, Sri Lanka, Barbados, Jamaica, Grenada, and St. Kitts and Nevis. 📊 Using detailed data, the paper shows that waiting too long to fix debt problems can make things worse and more expensive. ⏳💸 💡 The paper explains that simply restructuring debt is not enough. https://lnkd.in/e94iYHFn Countries need a strong plan that tackles the root causes of debt 🤝🌍. This research offers clear advice on how to handle creditors, read economic signals 📈, and time debt restructuring carefully to protect the economy and financial markets. It’s a practical guide to help countries navigate tough debt challenges. #SovereignDebt #DebtRestructuring #EmergingMarkets #IMF #DebtManagement #FinancialStability #EconomicRecovery

Current accounts and similar no maturity deposits (“#NMD”) are a fundamental element of the liabilities of #banks, especially in countries where the interest paid on them is low or null. As they have no defined maturity, current accounts need to get modeled for calculating the liquidity risk, the #IRRBB, their Fund Transfer Prices (“#FTP”) as well as for defining the risk appetite of the bank. In addition, regulators also require banks to distinguish between stable and unstable deposits. For this purpose, and due to several requests, I have compiled the attached report including the latest research and modelling issues with respect to NMDs. The compilation includes the following: 1.   Sight Deposit and Non-Maturing Liability Modelling 2.   Non-maturing deposits modelling in a Ornstein-Uhlenbeck framework 3.   Modeling Deposit Rates of Non-Maturity Deposits 4.   Determinants of Non-maturing Deposit Pass-through Rates in Eurozone Countries 5.   Estimating Non-Maturity Deposits 6.   Modelling of Non-Maturity Deposits 7.   Modelling Non-Maturing Deposits: Examining the Impact of Market Rates on Deposit Volume Using Regression, Time Series Analysis, and Vasicek Methods 8.   Assessing the consequences of low rates environment on ALM and non-maturing liabilities modeling 9.   Modeling of No Maturity Deposits for IRRBB: Statistical or behavioral approach? 10. DYNAMIC BANKING WITH NON-MATURING DEPOSITS If you need additional resources or guidance regarding the above subject, do not hesitate to reach out. #riskmanagement #marketrisk #interestraterisk #ALM #ALCO #Boardofdirectors #riskmeasurement #internalmodeling #MRM #interestraterisk #modelrisk #behavioralmodeling #nonmaturitydeposits #assetliabilitymanagement #CRO #regression #Vasicek #yieldcurve #information #resources #modelling #deposits #banks #treasury #currentaccounts #forecast #sensitivityanalysis #gap #duration #liabilities #balancesheet

🚀 Demystifying Subordination Risk in Syndicated Loans & Private Credit Corporate debt structures are usually more complex especially in LBOs and leveraged recapitalizations. Understanding subordination risk is critical - whether you're a lender, investor, or a borrower. Let’s break it down with a real-world case study and hard data: $10Bn Financing for MegaCorp (Hypothetical LBO) Capital Structure: 1. $6Bn Senior Secured Loan (at an operating subsidiary, say OpCo, secured by charge on factories & IP) 2. $3Bn Unsecured Bonds (at the parent holding company, say HoldCo, no collateral) 3. $1Bn Subordinated Debt (at HoldCo, contractually junior in repayment) 1️⃣ Collateral Subordination: Risk: Only secured creditors can claim specific assets. What Happens in Default? - Banks (senior secured lenders) seize and sell MegaCorp’s factories/IP. - Unsecured bondholders get nothing until secured lenders are fully repaid. 💡 Data Point: Secured loans recover ~60-80% vs. ~30-50% for unsecured (S&P). 2️⃣ Contractual Subordination: Risk: Subordinated debt agreements explicitly rank repayment priority. What Happens in Default? - The $1Bn subordinated debt is contractually behind unsecured bonds at the HoldCo in repayment. - Even if HoldCo has $500million left after paying unsecured bonds, sub-debt may recover pennies on the dollar. 💡 Data Point: Subordinated debt recovers just ~20-30% on average (Moody’s). 3️⃣ Structural Subordination: Risk: HoldCo debt is structurally junior to OpCo debt because cash flows must service operating subsidiary debt first. What Happens in Default? 1. OpCo’s $6Bn loan is repaid first from subsidiary cash flows/assets. 2. HoldCo’s $3Bn bonds only get leftovers (if any). 3. Subordinated HoldCo debt? Near-total wipeout in a default scenario. 💡 Data Point: HoldCo debt recovers ~10-30% vs. ~60-80% for OpCo debt (Moody’s). Why Does This Matter: ✅ For Lenders: Pricing reflects subordination—HoldCo debt often yields 300-500bps more than OpCo debt. ✅ For PE Firms: They could exploit structural subordination by loading OpCo with assets and HoldCo with debt. ✅ For Investors: Recovery rates vary wildly — always important to check where you sit in the capital stack. In restructuring battles, OpCo lenders often block cash upstreaming to starve HoldCo lenders/creditors—a key risk in Leveraged Buyouts (LBOs). Krishank Parekh | LinkedIn

Struggling with cash flow despite steady revenue? Read this. Most businesses focus on revenue growth, but forget that timing matters more than total numbers. Your debt structure might be strangling your operations. During my years restructuring finances for MSMEs, I've seen countless profitable businesses gasping for air simply because their loan repayments peaked when their cash reserves ebbed. Remember when I helped that manufacturing client switch from monthly fixed payments to a seasonal repayment schedule? Their stress vanished overnight. Their revenue always spiked in Q4, yet their heaviest loan payments fell in Q2. We realigned their amortization schedule to match their natural business cycle. Smart debt structuring considers your unique operational rhythm. Consider bullet loans that allow interest-only payments until you can handle the principal. Explore graduated payment structures that start small and grow with your business. Investigate seasonal amortization that mirrors your cash flow patterns. Your business deserves a repayment schedule that respects its natural ebb and flow. The right structure preserves working capital during lean periods while capitalizing on abundance during peak seasons. Think beyond interest rates. The structure of how and when you repay matters just as much. After restructuring debt for hundreds of businesses, I can tell you with certainty: cash flow preservation through thoughtful amortization scheduling might be the most underutilized financial strategy. What financial structure is holding your business back today? Share your challenge below, and perhaps we can uncover a solution together. #CashFlowManagement #AmortizationSchedule #FinancialPlanning #BusinessFinance