Asset Liability Management Optimisation

APPENDIX 1Details of the Analysis Performed for Bank 1

APPLICATION OF THE OPTIMISATION MODEL – ASSET SIDE

Base Scenario   Under the Base scenario, the initial asset structure and their respective income is as follows:

• Floating rate assets – w_Asset1 = 78.37%
• Fixed rate assets – w_Asset2 = 20.31%
• Liquid Asset buffer – w_Asset3 = 1.31%.

The interest income resulting from the asset structure under the Base scenario is as follows:

• income_Asset1 = EUR0.0564bn
• income_Asset2 = EUR0.0184bn
• income_Asset3 = EUR0.00001bn.

Total interest income = EUR0.075bn.

The initial asset structure under the Base scenario.

Source: own elaboration.

Under the existing structure, the liquidity and interest rate risk exposure metrics are as follows:

• Cumulative short-term liquidity ratio = 59.7%
• Structural ratio = 91.9%
• Delta NII_+200bps = 80.5%
• Delta NII_-200bps = 11.62%
• CAR = 26.2%.

After the decision model is put in place, the asset structure changes as follows:

• Floating rate assets – w_Asset1 = 30.58%
• Fixed rate assets – w_Asset2 = 66.02%
• Liquid Asset buffer – w_Asset3 = 3.39%.

The resulting interest income has changed as follows:

• income_Asset1 = EUR0.022bn
• income_Asset2 = EUR0.0599bn
• income_Asset3 = EUR0.00002335bn.

Total interest income = EUR0.0819bn.

The implementation of the decision model resulted in an increase in the interest income over the period of 6 months of EUR0.069bn.

The asset structure ...