Course Category

Role of Liquidity in ALM

• The concept and relevance of Liquidity Management
• Sound practices in liquidity management
• The role of liquidity management in Asset Liability Management
• The inter-relation between liquidity risks and the other risks
• How to measure the quality of liquidity management
• The costs and benefits of liquidity management

Liquidity Crises - Case studies

• Credit Lyonnais
• Barings Bank
• Continental Illinois National Bank

Liquidity Measurement Systems - I

• The application of ratios to measure the relationships between various components of a balance sheet
• The analysis and measurement of liquidity ratios
• The application of ratio analysis for planning an institution’s activities
• A Bank’s on-balance sheet and off-balance sheet liquidity requirements
• The comparison between the various liquidity measures

Liquidity Measurement Systems - II

• The effects of asset liability changes on a banks liquidity
• The use of cash flows as a tool to measure liquidity gap
• The impact of maturity decisions on liquidity positions of banks and other institutions
• The application of statistical techniques for identification of variations in balances

Liquidity Measurement Systems - III

• The application of risk based measures
• The concept of liquidity conversion factor
• The regulatory guidelines on risk-based measures
• The various measurement strategies to manage liquidity
• The relationship between business portfolio mix and liquidity management
• The application of risk-based measures for liquidity

Practical tools and techniques

• The application of practical tools to measure and monitor liquidity
• The effect of business factor on techniques through the three case studies of
• Subsidiary Bank
• Regional Bank
• Community Bank
• Private Banking

Liquidity Strategies - I

• The asset, liability and off-balance sheet strategies to manage liquidity
• The use of FX-swap as a tool for transferring liquidity between different currencies
• The practical applications of liquidity management policies
• Costs and benefits of different ways of meeting liquidity
• The use of asset securitization as a tool for liquidity management

Liquidity Strategies - II

• The role of top management in formulating an organization’s liquidity strategy
• The challenges faced by an organization in conceptualizing the liquidity profile
• The liquidity risks in different lines of business:
• Loan Purchases and Sales
• Lease Financing
• Mortgage Banking
• Private Banking

Trading Liquidity Risk - I

• The factors affecting the trading liquidity of an institution
• The liquidity implications of different situations faced by an institution
• The various trading instruments used by financial institutions
• Forward Rate Agreements (FRAs) and their liquidity implications

Trading Liquidity Risk - II

• The instruments used in trading liquidity: forwards, swaps and options
• The risks associated with forwards, swaps and options
• The methods of hedging risks using these trading instruments
• The liquidity implications of these trading instruments

Trading Liquidity Risk - III

• The other financial instruments used in trading liquidity, viz., foreign exchange, money market securities and foreign exchange options
• The trading and funding liquidity risks associated with the above instruments
• The risk warning control signs monitored by financial institutions to manage the risks

Trading Liquidity Risk - IV

• The various strategies adopted by a financial institution to manage trading liquidity risk
• The precautions for managing liquidity risks
• The importance of trading liquidity management through case studies of
• Granite partners
• Long Term Capital Management (LTCM)
• Metallgesellshaft

Contingency Funding - I

• The concept of Contingency Funding Plan (CFP) if normal business operations are affected by crises
• The telltale signs of the emerging liquidity problems
• The strategies adopted by financial institutions to deal with crisis situations
• The six essential components of contingency funding plan
• The evaluation of contingency funding plan against preset objectives
• The FDICIA regulations governing liquidity management of financial institutions

Contingency Funding - II

• The components of contingency funding plan
• The purpose, scope and content of contingency funding plan
• Funds management and liquidity monitoring process
• The identification of liquidity crises and its administration

Job Aids