An asset-liability committee oversees a financial institution's funding, liquidity, interest-rate risk, and balance-sheet strategy.
An asset-liability committee (ALCO) is a management committee that oversees a financial institution’s balance-sheet structure, funding, liquidity, interest-rate exposure, and related earnings risk. It turns asset-liability management analysis into documented limits, pricing, funding, investment, and hedging decisions.
ALCO’s mandate commonly includes:
ALCO may also review capital, foreign-exchange exposure, transfer pricing, or product profitability where those matters interact with balance-sheet risk.
An ALCO often includes senior representatives from:
The chief financial officer, treasurer, or another senior executive may chair the committee. Independent risk management should retain an effective challenge role even when it attends as a member.
There is no universal membership list. A small bank may use one senior committee, while a large group may have entity, regional, and enterprise ALCOs.
| ALCO input | Decision it can support | Evidence to retain |
|---|---|---|
| Repricing and income simulations | Deposit pricing, loan structure, hedge limits | Scenario assumptions and sensitivity results |
| Economic-value measures | Duration position and long-term rate-risk limits | Base and shocked EVE results |
| Liquidity cash-flow ladder | Funding tenor and liquid-asset needs | Contractual and behavioral cash flows |
| Deposit concentration and runoff | Contingency actions and diversification | Customer segmentation and stress assumptions |
| LCR, NSFR, and internal limits | Regulatory and internal buffer decisions | Calculation, reconciliation, and breach analysis |
| Market and funding conditions | Issuance timing or collateral strategy | Quotes, spreads, capacity, and counterparty evidence |
Strong minutes distinguish information reviewed from decisions made. They should record material challenge, exceptions, dissent where relevant, and follow-up ownership.
Assume a bank reports:
ALCO might approve a package rather than one isolated action:
The record should show why the actions are expected to help, what they cost, who owns them, and what trigger causes further escalation.
| Body or function | Primary responsibility |
|---|---|
| ALCO | Management decisions about balance-sheet risk and structure |
| Treasury | Execution of funding, investment, cash, and hedge transactions |
| Independent risk management | Challenge, measurement oversight, limit monitoring, and escalation |
| Board or board risk committee | Risk appetite, policy approval, and oversight of material exposure |
| Internal audit | Independent assessment of governance, controls, data, and policy adherence |
Poor governance occurs when one group both takes risk and provides the only measurement and challenge.
A practical cycle is:
Meeting frequency should reflect the institution’s risk and market conditions. A monthly schedule may be typical in stable periods, while funding or rate stress can require more frequent review.
This page provides general financial education. It does not prescribe an ALCO charter, committee structure, policy, limit, funding decision, hedge, or regulatory response for any institution.