Asset-Liability Committee (ALCO)
An asset-liability committee oversees a financial institution's funding, liquidity, interest-rate risk, and balance-sheet strategy.
ALM, ALCO, EVE, and LCR concepts used to manage bank funding, liquidity, interest-rate exposure, and balance-sheet resilience.
Bank balance-sheet risk arises because assets, liabilities, and customer behavior do not reprice, mature, or generate cash at the same time. Asset-liability management (ALM) measures and manages those mismatches, while the asset-liability committee (ALCO) provides management oversight.
This section also covers two major measures: economic value of equity (EVE) for long-term interest-rate sensitivity and the liquidity coverage ratio (LCR) for standardized 30-day liquidity coverage.
| Concept | Main purpose |
|---|---|
| Asset-Liability Management | Coordinates assets, liabilities, funding, liquidity, and hedges within risk appetite |
| Asset-Liability Committee | Reviews exposures and authorizes or recommends balance-sheet actions |
| Economic Value of Equity | Measures present-value sensitivity under interest-rate scenarios |
| Liquidity Coverage Ratio | Compares eligible liquid assets with standardized 30-day stressed net cash outflows |
A bank funds fixed-rate loans with deposits that can reprice or leave quickly. Rising rates may increase deposit costs before loan yields reset, while deposit runoff can create a simultaneous liquidity need.
A useful review does not stop at one gap or ratio. It examines deposit behavior, prepayments, yield-curve changes, liquidity buffers, collateral, hedge effects, and combined stress. Interest-rate risk and liquidity risk can reinforce each other.
These pages provide general financial education. They do not determine a bank’s liquidity, safety, capital adequacy, funding strategy, hedge, or regulatory compliance.
Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.
An asset-liability committee oversees a financial institution's funding, liquidity, interest-rate risk, and balance-sheet strategy.
Asset-liability management coordinates a financial institution's balance sheet to control funding, liquidity, interest-rate, and earnings risk.
Economic value of equity measures the present-value difference between a bank's asset and liability cash flows and its sensitivity to interest-rate shocks.
The liquidity coverage ratio compares eligible high-quality liquid assets with net cash outflows during a standardized 30-day stress period.