Contemporary Challenges in the Asset Liability Management

The role of the active management of the banking book in the banking industry is constantly growing. This is dictated by heavily regulated landscape and increased competition for resources such as liquidity and capital. Given the market pressure, the relentless pursuit for the most efficient and productive use of a bank’s resources subject to consolidated risk and return appetite remains of upmost importance for banks of all size. The need for the use of the optimization technique to manage the banking book of a financial institution is becoming an imperative to remain profitable. This article states that the application of optimization techniques can provide useful information to understand the target structure for the banking book in terms of its composition of liabilities and is valid tool which helps to decrease the overall cost of funding. Moreover, the application of optimization techniques, in this article, is seen as the integrated management of the exposure to financial risks under one approach.