Seems backwards to me. As George Bush (the older one) said, "The past is over". The future is unlimited. We can do nothing to change what has happened, but we can do anything to change the future.
Although social media has been around for a while now, business profiles are still relatively new. Many financial institutions are still finding their way to the social media arena. As social media keeps growing in popularity, it is important that financial institutions climb on the bandwagon as well.
Gap, beta-adjusted gap, duration and even basic budgeting models only frustrate, confuse and even mislead the financial institution’s asset liability management committee (ALCO). Detailed gap analysis, fiddling with the distribution of savings balances and even calculating the duration of equity does not lead to better margins, nor do they mitigate rate risk.
Happy one year anniversary to Sparks from the Anvil! There has been a great response to the blog, thanks to all of you.
Since the introduction of the venerable GAP analysis in the mid-1970s, risk management has continued to evolve. It has moved from the basic mismatch of rate sensitive assets and liabilities to more sophisticated techniques – such as prepayment modeling, rate change betas on non-maturing deposits, and rate shocking with parallel rate shifts and non-parallel rate shifts. Then mark-to-market analysis of the balance sheet and the impact on equity was brought in with the attendant benchmarks. These are all interesting measurements of the company’s risk at a point in time. It’s like glancing at your car’s dashboard.
Whether your year-end is calendar or fiscal, there are a few things you can do to make the future-you happy. Examiners and auditors thoroughly enjoy marking off their-checklist of items to review and criticize. Most times the request letters ask for the same documents year-after year. Create an exam folder complete with instructions for yourself for the following year.
Interest rate risk, call reports, budget, ALCO, board meetings, re-doing the budget, exams, audits, holiday parties, vacation schedules…I’m already exhausted. My suggestion, budget your time! I can’t tell you how many times I hear clients say they had to postpone scheduled days off to complete their workload. This is the perfect time to plan what you can before year-end.
In part one of this series, we discussed establishing your goals and developing several alternatives or contingency funding plans. Next, we will discuss the remaining 3 rules.
"May you live in interesting times." This ancient Chinese proverb continues to describe the nature of banking. The banking community is going through the most challenging period since the Great Depression. Not only is the economy unsure, but flat interest rates, coupled with new regulation and increased consolidation, have caused massive structural changes within the financial industry. In brief, the task of management has become more difficult. It has changed from a maintenance task to one of survival. Today’s banker must be more sensitive to marketing, pricing, resource allocation, and productivity than at any time in the past. He/she must sharpen their business expertise, marketing skills, investment sense, and develop a tougher attitude toward expense control. To accompany all this, you must have the appropriate informational tools that allow you to assimilate and evaluate the impact of possible changes to the institution’s current and future income.
Financial institutions are not like other businesses. After all how many other businesses get a daily statement of condition? In what other business is the balance sheet also the product list? It must be remembered that a financial institution’s directors typically come from other industries. For these reasons, it is management’s responsibility to translate the business model, key operating ratios and banking language into terms familiar to directors to insure meaningful dialog.