ALCOM (Asset liability management committee)

Managing risk that arises with the mismatch between asset and liability. Managing
liquidity needs are vital to the operation of an institution. This prevents the institution
from facing adverse situation, which could be severe liquidity needs. Shortfalls in one
company can have severe impact on the whole system, as it can lead to a series of chain
events.
The Asset Management Liability Management Committee of Dutch Bangla Bank ltd is
headed by the Managing Director and it is comprised of senior executives of the Bank.

1. What are the main objectives?

Manage liquidity, or reduce Liquidity-risk: Liquidity risk is the risk that the bank may not
meet financial obligation as they become due. Liquidity risks also include banks inability
any asset at a reasonable price in a timely manner.
Provide cost effective funding to finance the asset growth and trade related
transactions: Cost effective funding to finance refers to the managing of long-term and
short-term capital needs and is done cost-effectively.
Optimize the funding cost: Funding cost refers to the interest rate paid by the financial
institutions for the finds that they deploy in their business. Lower costs would generate
better returns when the funds are given out as loans.
Increase spread with the lowest possible liquidity, maturity, foreign exchange and
interest rate risk. Interest rate risk refers to the risk that exist in an interest-bearing
asset, such as a loan or a bond, due to the possibility of a change in the assets value
resulting from variability of interest rates, due to many factors (supply and demand,
government, inflation etc). Banks also want to keep a variety of liquid asset and manage
it with the maturity of loans and obligations, so that they do not run into cash shortages,
and keep the least amount of cash on hand, as held cash is non productive.
Managing currency risks: It arises from the potential loss from changes in currency
exchange rate.

2. What are the core activities?

It is the policy of the bank to maintain adequate liquidity at all times in both local and
foreign currency. The liquidity is managed on a short term, medium term and long term
basis. There are approved limits for credit-deposit ratio, liquid asset-total asset ratio,
maturity mismatch, commitments for both on-balance sheet and off-balance sheet
items and borrowing from money markets to ensure that loans and investment are
funded by stable sources It is made sure that maturity mismatches are within limits and
that cash inflow from maturity if assets, customer deposits in a given period exceeds
cash outflow by a comfortable margin even under a stresses liquidity senario
With the oversight of Asset- liability Management Committee (AlCO), the Treasury
department manages the liquidity, interest rate and foreign exchange risks.

3. How do they perform the core activities?

Do periodic meeting
Review decisions
4.

what are the mandatory actions they take required by Bangladesh bank?
Every Financial institute is required to maintain a Cash Reserve Ratio of 2.5% on it customer
deposit. Bangladesh Bank maintains the Cash Reserve with a non-interest bearing current ratio.
Also every financial institute is required to maintain a Statuary Liquidity reserve (SLR) of 5 %,
including CRR, on its liabilities. The SLR can be maintained anywhere (it does not have to be
maintained with Bangladesh Bank).

5.

On top of that what do they do?

6. . the summary of the work they did in last five years?