ALCO Board Involvement

The Board is ultimately responsible for Asset Liability Committee (ALCO) Management.

“Existing interagency and international guidance identifies the board of directors as having the ultimate responsibility for the risks undertaken by an institution—including interest rate risk.” – Advisory on Interest Rate Risk Management, January 6, 2010

“As part of their overall responsibilities, a bank’s board and senior management should establish a strong model risk management framework.” – Supervisory Guidance on Model Risk Management, OCC 2011-2012

Those two statements alone make it pretty clear that the board needs to be knowledgeable in the entire “Wholistic” ALCO process and have a solid understanding of their institution’s current risk position and the strategies used to manage it.

They not only need to be up-to-date with the strategic recommendations but also understand how the institution got to that point and what drove the discussions. This is why ongoing board education is a key component of DCG’s “Wholistic” ALCO approach.