ALM Model Metrics - Asset Liability Management & Risk Management Consultants

Treasury Management

Engaged by a $30B Canadian bank as Acting Head of firm’s Corporate Treasury. This executive position had accountability for driving significant enhancements to the interest rate risk measurement and management process, including setting up an effective ALCO process. We provided direction in the areas of Interest Rate Risk Measurement and Management, Retail Pricing, ALCO, Liquidity Policy and Contingency Planning, Funds Transfer Pricing and Capital Management. A key goal was to upgrade the knowledge of the Treasury team, and to educate the firm’s Executive around best-practice Treasury approaches. During this period, we ompletely redesigned the ALCO reporting package; recommended, and received ALCO approval for, a major shift in the firm’s interest rate risk management strategy; and developed and syndicated a revised ALCO mandate, in line with best practices bank ALCO’s.
Engaged by a mid-sized US bank to examine their Treasury policies and practices. The scope of this engagement was broad and encompassed: Treasury’s mandate, organizational structure and staffing, Treasury corporate governance, risk appetite and philosophy, Treasury infrastructure and technology, interest rate risk management, liquidity risk management, the role of the investment portfolio, capital planning, Treasury’s role in bank performance measurement and reporting, balance sheet structure and a balance sheet management framework, performance metrics, and reporting responsibilities for Treasury/ALCO. This engagement resulted in a significant number of operational and strategic recommendations around mandate, corporate governance, risk limits and organization.
Engaged by a Crown corporation of the Federal government to provide a senior bank Treasury and risk management perspective to the Canada Mortgage Bond Evaluation project. Specifically we were asked to assess theextent to which the CMB Program has contributed to lower mortgage costs. This engagement involved a comprehensive survey of bank treasurers, capital markets participants and other stakeholders. Our work addressed cost of funds alternatives, FTP processes and mortgage pricing dynamics. This engagement will result in a major report as input to government policy which is currently being developed.
Engaged by a mid-sized Canadian financial institution with a broad mandate to review their Treasury, ALCO and interest rate risk management policies and practices. This review included interviews with all members of the Executive Committee, and the presentation of a comprehensive report to the ALCO. We made a number of recommendations in the areas of ALCO mandate, risk appetite and portfolio management.

Interest Rate Risk

We have conducted a number of interest rate risk model validations for US and Canadian banks and trusts, ranging in size from a few $B through $50B in assets.We structure our validations to meet regulatory requirements, as well as to provide value-added recommendations for internal management.
We have reviewed and evaluated the interest rate risk management processes within a number of financial institutions. Deliverables vary from client to client and have encompassed model reviews, the development of enhanced ALM processes, and/or the acquisition of new models.

Liquidity Risk

Retained to review a large Canadian bank’s liquidity policies and liquidity contingency plan. Our role was to offer recommendations with a view to streamlining and refining the policy framework, and the presentation of the framework to the firm’s senior corporate governance committees.
Reviewed the liquidity measurement and management practices of a medium-sized Canadian bank. A number of enhancements were recommended regarding policy, risk measurement and the stature of Treasury within the firm. As a result of these enhancements, the bank was in an excellent position to manage their way through the difficult market conditions that began in the summer of 2007.

Funds Transfer Pricing

We have been engaged by a number of Canadian and US financial institutions to educate their management teams on the benefits of implementing FTP, to review their FTP processes and to recommend enhancements.
On a number of occasions, we have been engaged to manage FTP implementations, offer support on a range of other Treasury issues. These engagements have resulted in the implementation of best-in-class FTP processes and wide-spread buy-in.

Capital Management

We have been retained by an number of US and Canadian firms to offer a variety of capital management services.

Economic capital and stress testing (“top 20” US bank holding company)
Implementation of economic capital for interest rate risk and ICAAP (large US bank)
ICAAP support re liquidity stress testing and economic capital for interest rate risk (Canadian Trust)
Assess economic capital and RAROC framework and methodology (mid-sized Cdn bank).
Review the Basle Two Pillar Two roadmap (major Canadian Bank)
Development of revised interest rate risk policy limits and a revised approach for specifying risk appetite for an important dialogue with regulators (mid-sized Cdn Bank)

Enterprise Risk Management

Engaged by a mid-sized US financial institution to conduct a detailed and independent assessment of the risks of its funds management business. The scope of this engagement encompassed risk appetite and philosophy, corporate governance and organizational structure, interest rate risk, liquidity risk, credit risk, operational risk, capital and balance sheet management. This was a broad and strategic review, and resulted in recommendations to enhance the current practices in the areas of ALCO reporting, alignment of accountabilities and liquidity policy. We also made a number of strategic recommendations in the areas of credit portfolio management, economic capital, balance sheet management and risk-adjusted profitability.
Engaged by a mid-sized Canadian FI to support the development of a profitability measurement and management program. Our role was to provide expertise and advice regarding the project’s approach and the measurement and management framework.