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[Music] asset liability management encompasses a wide range of activities of varying degrees of complexity asset liability management is generally referred to as high-level management of bank's assets and liabilities with an objective to increase the value of the bank's capital and assets the principal function of asset liability management desk established at the bank is to manage liquidity risk and interest rate risk faced by the bank however it will also set the overall policy for credit risk and credit risk management asset liability management maximizes the risk adjusted returns to shareholders over long-run asset liability management involves techniques to measure the matching of assets and liabilities thereby assisting in prudent management of the investment portfolio thus the asset liability management is the management of total balance sheet in terms of size and quality in early days bankers used to interpret asset liability management as a system of matching cash inflows and outflows and thus of liquidity management they used to think that if a bank meets its cash reserve ratio and statutory liquidity ratio stipulations regularly without undue and frequent resort to purchased funds it can be said to have a satisfactory system of managing liquidity risks and hence of asset liability management nowadays the actual concept of asset liability management is regarded much wider and of greater importance to bank's performance historically asset liability management has evolved from the early practice of managing liquidity on the banks asset side to a later shift to the liability side termed liability management to a still later realization of using both the assets as well as liability sides of the balance sheet to achieve optimum resources management later on asset liability management began to extend beyond the bank Treasury to cover the loan and deposit functions the induction of credit risk into the issue of determining adequacy of bank capital further enlarged the scope of asset liability management in the current decade earning a proper return of bank equity and hence maximization of its market value has meant that asset liability management covers the management of the entire balance sheet of a bank [Music]