The Dreaded ALCO Meeting: 5 Big Ideas Part III
- Joe Kennerson
- 5 hours ago
- 4 min read
Even the most engaged ALCO meetings can fall short of their goals if they can’t translate their best intentions into real strategy.
It’s not always an easy or straightforward mission. But we can take some guidance from institutions that do it well. These ALCOs add clarity to their most important decisions by following their data’s lead and taking a more structured approach to consider the impacts.
In Part I of this series, I offered some steps toward telling a concise story to promote healthy dialogue. We continued the discussion in Part II, where we explored building a sharper focus and zeroing in on what you can control. Now, let’s round things out with the final two Big Ideas to drive clearer strategy.
Big Idea #4: Let the Data Do the Talking
When we ask bankers what their deposit pricing philosophy is, the most common response references keeping rates close to local competition.
While local competition is important, this philosophy faces outward. It is dependent upon other players that may be facing challenges well beyond any other institution’s control (e.g., regulatory matters, tighter liquidity position, strong loan pipeline, etc.).
Yet amid the competitive landscape, deposit pricing is the biggest challenge in the industry and has the greatest immediate impact on margin. It’s time to look inward and let data do the talking.
But what does that mean exactly? The term “data analytics” can be found on banners of nearly every booth at a banking conference these days. The truth is that data analytics is more than just compiled reporting. The strongest practitioners use data to tell a story or forecast the impact of a rate strategy to help inform their next move.
For example, in myriad cases throughout 2025, DCG’s Deposits360°® solution has shown that premium MMDA or Savings products are outperforming CD specials in terms of total growth, lower cannibalization, and a lower marginal cost of funds on the new money earned. These insights are enabling bankers to fine-tune their deposit strategy to get surgical with upper tier MMDA rates and not overpay for CDs. We are finding that these relationship-level insights are now starting to trump local competitive pricing in the stack of deposit pricing philosophies.
Other data insights that are influencing deposit strategy today may be:
Tracking CD rollover vs new money flows and its impact on CD pricing as the Fed eases
Understanding new money vs cannibalization on deposit promotions to know when to pivot or accelerate successes
Quantifying the volume impact of lowering top tier rates after a Fed cut
The greatest advantage that DCG has observed in client ALCO meetings that use data productively is the ability to offset emotion with hard analytics when making difficult pricing decisions. It’s not a matter of if, but when every institution makes this evolution.
Big Idea #5: Ask the Question, “So What?”
The theme of this Dreaded ALCO series has been how to transform a sleepy, mundane meeting into a standing-room-only strategic profit center. It stands to reason, then, that the topics presented ALCO should be illuminated with the questions that bring them to life.
Pose questions to your team like:
“So what does it mean to us that we have earnings exposure to rising rates even with the market leaning to further rate cuts”?
“So what do two more fed cuts mean to net interest income levels and how much would I have to lower deposit rates to cover that gap?”
“So what does this mean for the future of our balance sheet and strategic plan?”
I’ll share an example of a bank client that has experienced greater than expected loan growth after some competitors exited their market. Their on-balance sheet liquidity levels quickly dropped to their lowest point in recent history – and the liquidity pressures are not slowing.
Their questions were So what does this mean for:
Managing to tighter on-balance sheet liquidity in the future?
A higher dependence on wholesale funding?
The board’s comfort level operating in this new liquidity era?
Potentially shifting the deposit strategy to be more offensive?
Understanding the marginal cost of funds on new deposits vs wholesale?
Loan pricing and spreads on different levels of credits and new vs legacy relationships?
The objective is to go beyond “checking-the-box” in traditional ALCO analysis and to parlay available information into strategic thinking. This can only happen if members ask questions that push beyond the immediate impacts of the decisions at hand and meaningfully consider the farther-reaching implications.
It’s been a pleasure to share these thoughts about how institutions are transforming their ALCOs. As you can tell, DCG is passionate about the very real (though often unrealized!) potential for ALCO to be the true engine of strategy.
If you’d like more discussion of these and the other ALCO Big Ideas – and especially how they may apply to your institution – I’d welcome hearing from you.
ABOUT THE AUTHOR
Joe Kennerson is a Managing Director at Darling Consulting Group. In this capacity, he works directly with financial institutions by providing solutions for their asset/liability management process in the areas of interest rate risk, liquidity risk management, ALM modeling, regulatory compliance, and executive-level education. He is a frequent speaker and author and directly advises clients in all aspects of ALM.
Contact Joe Kennerson at jkennerson@darlingconsulting.com or 978-499-8150 to work collectively to transform ALCO into a profit center.
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