Asset and liability management has become a critical objective for financial services. In fact, 80% of entities are considering making significant improvements to their ALM functions.
This is highlighted by the study of SAS, In collaboration with celent“Modernizing Asset Liability Management”, which provides information on the strategies that organizations are implementing to strengthen their balance sheets in a context of rising interest rates and liquidity risk.
“At SAS, we have been preparing for this moment for a long time, even before the recent bank failures, and have invested strategically in this area to help financial institutions better predict and mitigate risk,” said Troy Haines, SAS Senior Vice President of Risk Research and Quantitative Solutions.
A new approach to ALM
Investments in ALM technology vary according to the size of the financial institutions. Tier 1 firms with assets of more than $750 billion focus their efforts on next-generation systems such as cloud-native, API-based, and machine learning.
SAS and Celent Study Warns of Lack of Asset Liability Management (ALM) Readiness
Meanwhile, about half of the third- and fourth-tier firms, with assets between $50 billion and $249 billion, are considering adopting new systems.
In the near term, the top priorities for improvement in the financial sector are forecasting, alignment, and automation. Nearly 59% of entities seek to improve forward-looking simulation capabilities, more than 50% seek better alignment with risk, treasury and finance functions, and 52% seek greater automation in risk areas required by regulators.
The main objective of most financial institutions is to achieve integrated balance sheet management. Although only 29% have fully automated the exchange of data between ALM and other risk or business functions, 40% say they have achieved integrated balance sheet management, and another 39% are working towards it.