Policies that match the tolerance of your financial institution.
There is no one-size-fits-all policy when it comes to asset liability management (ALM). DCG’s “Wholistic” ALCO approach ensures that your policies are current and appropriate for your institution.
Policies need to outline risk tolerance levels and assign responsibilities for all aspects of the ALM process. It is important that the policies all work together, and that risk management in one aspect of the ALM process does not contradict other policies.
Specific target ranges and limits for performance metrics should be included. However, these policies should be reviewed by senior management and your board to ensure that the limits and responsibilities outlined are still in line with their philosophy, and appropriate changes should be made and documented.
“Institutions are expected to have comprehensive policies and procedures governing all aspects of their IRR management process.” – Advisory on Interest Rate Risk Management, January 6, 2010