Handbook of Asset and Liability Management: From models to optimal return strategies

33

Conclusions on the Future of ALM

Il faut attendre à cueillir la poire qu'elle soit mure.

Of course, many ALM teams do not apply at this time all the recommendations presented in this book. Indeed, this book gives a large panel of the future developments in the ALM field.

33.1 ALM DIVERSITY

This book provides the occasion to present the diversity of ALM activity: the diversity of the products sold to the customers, the diversity of the possible ALM organizations and the diversity of the different ALM risk profiles. Nowadays, with the new regulatory environment and under the international IFRS rules, the diversity of the ALM activity has tended to diminish.

33.1.1 Product diversity

The diversity of the products the A/L managers deal with explains the diversity of ALM practices.

On the asset side, it is clear that the class of assets the A/L manager can invest in may differ from one country to the other. In the banking sector, the types of commercialized loans differ also:

• Some customers prefer fixed rate mortgages with fixed repayments (in France, Belgium) while others prefer floating rates mortgages (in the UK, Spain).
• Some banks propose floating rate mortgages with fixed repayments. Therefore, the maturity of the loan depends on the interest rate evolution: if the interest rates decrease, the loan maturity decreases.

Moreover, the prepayment option differs from one country to the other:

• In the US, there is no penalty when a customer prepays his mortgage.
• In France, the ...