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Asset Liability Challenges for Treasury

Asset Liability Challenges for Treasury. Manfred Wiebogen ACI Croatia 16 th ACI FMA Annual Assembly 12 th May 2019. Asset Liability Challenges for Treasury. Challenge 1 FRTB – Fundamental Review of the Trading Book Challenge 2 ILAAP – Internal Liquidity Adequacy Assessment Process

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Asset Liability Challenges for Treasury

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  1. Asset Liability Challenges for Treasury Manfred Wiebogen ACI Croatia 16th ACI FMA Annual Assembly 12th May 2019

  2. Asset Liability Challenges for Treasury Challenge 1 • FRTB – Fundamental Review ofthe Trading Book Challenge 2 • ILAAP – Internal LiquidityAdequacy Assessment Process Challenge 3 • IRRBB – Interest Rate Risk in the Banking Book Asset Liability Challenges for Treasury

  3. Challenge 1 / The evolution of the regulatory Treatment of the Trading Book Increased equity requirements over time lead to falling Return on Equity (RoE) for Trading positions and reduce the attractiveness of the trading books *) CVA = Credit Value Adjustment **) IRC = Incremental Risk Charge ***) CRM = Comprehensive Risk Measure Asset Liability Challenges for Treasury

  4. Challenge 2 / Liquidity management Capital Commitments Compliance Stress Scenarios Target:Ensuring that the bank has enough liquidity buffers/counterbalancing capacity in case of stress to be able to survive at least one month Processes Liquidity-Buffer Counter-Balancing Capacity • Liquidity Management isgettingmoreandmoredemanding: • Additional resources due to process requirements (ILAAP) • liquidity transformation as a source of income in ALM • managing LCR HLAs in a profitable way Limits Pillar 1: LCR*; NSFR** Pillar 2: ILAAP*** *) LCR = Liquidity Coverage Ratio **) NSFR = Net Stable Funding Ratio ***) ILAAP = Internal Liquidity Adequacy Assessment Process Asset Liability Challenges for Treasury

  5. Challenge 3 / Interest Risk Management The legislator tightened the requirements for interest rate risk management in the banking book • The interest rate risks in the trading books tend to be reduced and partly transferred to the classic ALM banking book • Negative / low-interest phase produces pressure on the interest rate risk result in ALM and leads to new risks (keyword “implicit customer floors”) The evolution of the regulatory environment for interest rate risk 10/2006 05/2015 04/2016 11/2016 10/2017 07/2018 01/2016application 01/2018application 06/2019application 12/2019application Major banks Small banks CEBSGuideline EBA Guidelines(EBA/GL/2015/08 CP EBA Guidelines(EBA/CP/2017/19) EBA Guidelines(EBA/GL/2018/02 BCBS 368 Draft„CRR2/CRDV“ IRRBB - Interest Rate Risk in the Banking Book Asset Liability Challenges for Treasury

  6. Treasury needs ALM – ALM needs Treasury Asset Liability Management needs the technical knowledge of Treasury Regulation and difficult money / capital market conditions need in-depth instruments know how „to the basis point“ in order to make ALM strategies profitable Treasury activities are shrinking and tend to be integrated into ALM Asset Liability Challenges for Treasury

  7. ALM Education provided through ACI Croatia Interest Risk Management in the Banking Book i28 Online Simulation Enjoytheanimated Tutorial andBeat the Benchmark (Champagne)https://i28.financetrainer.com ALM Professional Cyber*School – Interest Risk Knowhowandopportunityfor a Finance Trainer Certification (University ofAdvanced Studies/Vienna) Free ACI CroatiaWebinar and Simulation (Champagne forthewinner)15th May – 1 p.m. – register via ACI homepageordirectly at theAssembly Asset Liability Challenges for Treasury

  8. i28 Online Simulation Level 1.1 – The forecast shows an interest rate increase within the next 12 months (purple line). Withou a reaction, the bank can expect losses – What could you do to improve the result. Task 1: Improve your interest gap contribution by 0,9 Mio EUR.- To do so, you must enter an asset or liability position of exactly 100 Mio EUR in the term bands 3 Months or 10 years. Asset Liability Challenges for Treasury

  9. Finance Trainer Dealing Certificate Preparation by ACI Croatia 2 daysprepworkshopJuly 2019; register via ACI Croatiahomepageordirectly at theAssembly DealingCertificateCyber*School tohave an optimal chanceto pass theexam (Pass Ratio of FT Candidates: about 86%) Register via ACI Croatiahomepagehomepage or directly at the Assemblytogetthespecial rate Asset Liability Challenges for Treasury

  10. Visit our booth in front of the conference roomI am happy to meet you!

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