ALM as a service
By admin
Published On 16 September, 2020
An entity with growing presence in Spain identifies the need for an ALM solution that, in addition to ensuring the thorough execution of all the regulatory Interest Risk and Liquidity Risk reporting it optimizes its balance sheet management and aligns it with the strategic objectives.
The goal is to cover the requirements of the entity agilely while reducing the impact on its systems and making minimal use of internal resources, both for the implementation and for the execution and management of the ALM process on a recurring basis. In addition, expert support will be necessary for the presentation, defense and substantiation of results.
Challenges
- The existing ALM process relies on manual labor and there is no strong ETL.
- There is no ALM solution/tool that allows the modeling and parameterization of assumptions according to the requirements of the entity.
- Lack of internal resources in the Entity to optimize the ALM process, perform analysis of results and offer explanation and substantiation of results at the ALCO.
- Impossibility of executing different what-if scenarios that would improve the management of risk.
- Lack of understanding of the parameters or the assumptions considered in risk calculations (black box).
- Lack of traceability between the information reported in each of the regulatory states, which makes the substantiation of results ever so more difficult.
- No flexibility in the generation of new reports
Approach / Strategy
A basic information-based solution is proposed that aims to better visibilize the entity’s interest rate and liquidity risk metrics to achieve the end-to-end automation of the process, thus providing the user with reliable, defensible and reliable data:
- Definition of a global layout for the ALM model that collects the input data required for regulatory and management reports.
- Establishment of automatic processes for validation and adaptation controls at a technical and functional level, ensuring the veracity, completeness and quality of the information.
- Accounting balance with thorough assessment of the entity.
- Definition and implementation of the entire ETL transformation process, providing transparency, automation and flexibility, if required.. Available to and accessible by the entity.
- Modeling of products without maturities, pre-payments and non-performing loans.
- Full parameterization and set-up of ALQUID as an ALM tool. Resolution of doubts and technical queries.
- Documentation of the process in a methodological manual, collecting all the criteria and assumptions approved by the Entity.Operative manual to facilitate the replication of processes
ALQUID Benefits
- Outsourcing of the ALM process -> Execution and operation of the end-to-end ALM process by Nfq, avoiding consumption of resources by the Entity. From data extraction to presentation at the ALCO.