Definition Definition

Assets-Liability Management

Every financial institution i.e. bank has to manage its assets-liability. Assets are bank’s investment and liabilities are bank’s sources found.

Assets-liabilities management refers to controlling the sensitivity of bank’s financial position to change in market interest rates & other factors to limit looses on its income or equity.

The purpose of assets-liability management is to formulate strategies & take actions that shapes the balance sheets and protects its assets, equity & income so that bank’s desired goal can be achieved.

 Asset/liability management is the task of managing the funds of a financial institution to accomplish the two goals of a financial institution:

(1) to earn an adequate return on funds invested and

(2) to maintain a comfortable surplus of assets beyond liabilities.

Asset/liability management also called surplus management.

 Asset-liability management is the process of decision making to control a bank’s exposure to interest rate risk.

See also Liability management


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