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  • Writer's pictureKeri Crooks

If your ALCO conversations haven't changed, be concerned

Now Is the Time to Do Our Homework on Deposits

Financial institutions are in the business of taking calculated risks, but it is the responsibility of ALCO to measure and manage those risks – and to ensure the institution is compensated for taking them.

Consider the following:

1) The FOMC tightening strategy has already delivered 2.25% of rate hikes in a 4-month timeframe (interest rate risk)

2) Depositors are in the early stages of using and/or investing funds elsewhere (liquidity risk)

3) Indicators abound that recession is already underway (credit risk)

All three of these potential risks have now come into play, at a record pace. The implication for institutions? ALCO and board discussions should be changing, strategies adjusting, and internal feedback loops shortened up.