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Oh asset liability management that is a LM here we are talking in the context of banking system what is a sir liability management asset liability management or ALM in the banking context is a continuous process of planning organizing and controlling the essay liability volumes within the bank SL liability maturities within the bank SL liabilities interest rates and asset liability yields so LM is not a one-time process it is a continuous process it involves planning organizing and controlling of SL liability volumes maturities interest rates and yields what is the objective of a LM objective of a LM is to protect to enhance what number one the net interest income that is n I I to the net interest margin that is n I M this is also called separate three market value of net worth of the bank so ultimately the objective of SL liability management is to manage the assets and liabilities in such a way that enhances the solvency position of the bank by way of protecting its NII protecting its ni m and protecting the market value of net worth of the bank what strategy banks do adopt for ALM purpose so banks broadly adopt three type of strategy the first one is separate management separate management means to maximize the separate by reducing the exposure to cyclical rates and in that way to stabilize the earning so banks identify those areas which are exposed to cyclically interest rates and they try to reduce those cyclically gray areas and that helps in stabilizing the earning of the banker second one is gap management under this the banks try to balance the gap between interest sensitive assets and interest sensitive liabilities for this purpose they distribute the assets and liabilities into various time bands called buckets according to their maturity period so assets and liabilities are categorized into various time buckets and placed according to their maturity period here inter sensitive asset means those assets which are Lea priced interest-sensitive liabilities means those liabilities which are repriced means those assets liabilities which are impacted by change in interest rates so they are called interest sensitive assets the third strategy could be interest sensitivity analysis so this analysis is done to understand the impact of change of interest rates on banks margins on banks this up red now what type of risk is managed through a LM so these risks broadly fall in two category so first is interest rate risk interest rate risk is further broken into gap or mismatch risk basis risk embeded option risk yield curve risk reinvestment risk and the second category of risk is liquidity risk so these are different risks that are managed through ALM now who is doing ALM within the bank so LM is the responsibility of a high-powered committee called Elko or SL liability committee this committee is headed by chief executive officer of the Bank Thank You friends for watching this video I hope you have been benefited by the contents of the video thank you once again