Banks are financial institution which directly of indirectly influences every modern man’s life. In its simplest form, a bank is an institution where its clients keep their surplus deposits, and these deposits are invested in trade, commerce and industries on term basis, i.e. short, medium and long term. A bank connects customers with capital deficit to customers with capital surplus.
A bank’s deposits are its liabilities, and its loans and investments are its assets. It generates revenues in a variety of different ways including interest, transaction fees and fees for financial advices. The main method is via charging interest on the funds it lends out to customers. The bank profits from the differential between the level of interest it pays for deposits and other sources of funds, and the level of interest ...view middle of the document...
Also, every scheduled bank has to maintain 18% (including CRR) of its average total demand and time liabilities in cash, gold or as unencumbered approved securities daily with Bangladesh Bank. Again, at present every scheduled bank has to maintain a minimum capital requirement of 9% of Risk Weighted Assets. From July 01, 2011 this requirement will be 10%.
To hedge itself against interest rate and liquidity risk, to price its loans, and to meet regulatory requirements a bank must manage its assets and liabilities. Asset liability management (ALM) is the process of making decisions about the composition of assets and liabilities and the risk assessment. Poor management of assets and liabilities affects bank’s profit and wealth. Hence we have undertaken this study of asset liability management at National Credit and Commerce Bank Ltd.
1.1 Scope and objectives
The scope of this study is big. It covers a broad spectrum of areas like: credit management, liquidity management, risk management, customer relationship management etc. But in this study we have concentrated on asset liability management.
Objectives of the study have been:
1. To give an overview of theoretical development
2. To shed light on administration of asset liability management
3. To measure the efficiency of ALM of NCCBL.
4. To evaluate the overall performance of the bank.
5. To find out the problems in existing systems and to suggest remedial measures there to.
To materialize the objectives of the study, different techniques have been used. The data has been collected from secondary sources. The sources include annual reports, books and periodicals. Different mathematical techniques have also been used to analyze the collected data.
A study like this is more meaningful when the results are compared to those of peer-group banks. We have not performed such comparison. Also, because of time constraints the study could not be made more elaborate.