If your ALCO conversations haven't changed, be concerned
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.