CHAPTER 5

Asset Liability Management in Major Banks

Asif Ahmed

Citigroup

Those who triumph compute at their headquarters a great number of factors prior to a challenge. Little computation brings defeat. How much more so with no computation at all!

—Sun Tzu, c.490 BC, Chinese military strategist

Introduction

Basel II has been a catalyst for many banks to revisit their market and credit risk management. Flattening yield curves and consolidation in the banking market has meant that the treasury functions within a bank are often asked to help with the formulation of strategy. Risk budgeting based on return on economic capital has become a key platform for ­capital ­allocation decisions.

This chapter will describe some of the ways the treasury assists ...

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