ALM Partners’ asset and liability services include unique solutions to support business development, net interest income optimization and interest rate cover, and comprehensive balance sheet risk management. We offer the following financial risk management skills, modelling and services: interest rate risk management, liquidity and funding structure management, credit risk modelling, solvency and capital adequacy assessments, as well as IFRS 9 modelling solutions for expected credit loss (ECL) and hedge accounting. Please find more information about our services below.
Interest risk management
Interest rate risk management is modelled based on the operator’s interest-bearing business, the interest income and the expenses it generates, and the interest rate and market valuations of the interest-bearing items. Changes in the market value of net interest income and interest rate-related business are analysed by different interest rate scenarios and business and customer behaviour. Based on modelling and reporting, the current and targeted optimal risk-return position is assessed. The interest rate risk position can be influenced, for example, by interest rate hedges, changes in the structure of investments, or changes in the entity’s own product.
For interest rate risk management, we fulfil the European Banking Authority’s (EBA) most extensive banking requirements for interest rate risk management / IRRBB (Interest Rate Risk arising from the Banking Book). Modelling and reporting requirements depend on the size of the bank, and our services and produced models can be scaled based on bank size requirements and jointly identified modelling features based on business benefits. Similarly, we are specialists in the modelling and pricing of trading book interest and other risks, helping our clients to meet the Fundamental Review of the Trading Book requirements.
We at ALM Partners model and analyse the development of interest income and the associated interest rate risk. We help financial institutions to respond to all interest rate risk questions, such as what is likely to be the net interest income in the next calendar year under different market conditions, and how and by what measures interest rate risk, interest rate positions and their predictability can be further improved.
Liquidity management services
We offer modelling, reporting and expertise on liquidity and financial structure. Liquidity modelling and reporting can be used to monitor current inflows and outflows, including the behaviour of cash flows in different interest and customer behaviour situations. Modelling can be carried out in accordance with the present balance sheet as well as including forecasts for the entry and exit of the planned new business, for example, new loans to be granted with the repayment program. Liquidity services bring predictability to cash flow and financial structure. At the same time, the planned liquidity level will be ensured, as well as the fulfilment of regulatory requirements for liquidity and financial structure (LCR banks and NSFR, etc.). In the optimisation of the liquidity buffer, the aim is to optimize the level of liquidity reserves to the desired level and to seek to direct the funds exceeding this level to productive business use.
Our services include liquidity modelling and calculation on the contractual level (individual credit / deposit level). In addition, we implement liquidity and financing strategies and, in cooperation with banks, implement internal liquidity management processes (ILAAP) with reporting. Furthermore, we produce banking reporting for the banks’ liquidity area (LCR, NSFR, ALMM).
Credit risk modelling and capital adequacy
As part of our asset, liability and capital management services we provide support in credit risk modelling and implementation of different solutions based on our customers’ individual needs. Furthermore, ALM Partners offers capital planning (ICAAP) and stress-testing to support in capital adequacy assessment.
IFRS 9 -modelling solutions
We provide our customers with IFRS 9 -modelling solutions. We offer support in the implementation and credit loss provisions of IFRS 9, from the asset and liability viewpoint. These services include, for example, expected credit loss (ECL). We handle ECL modelling, monthly calculations, as well as the continuous development of ECL based on our customers’ needs.
As part of our IFRS 9 -solutions we also offer hedge accounting services, which includes hedge account modelling, monthly calculations, and continuous development as per the customers’ needs.