Theoretical and practical aspects of Asset liability management in commercial banking: A case of HSBC Bank.

Background of the Research

Asset Liability Management (ALM) is a critical function to the banks and financial institutions in present
environment due to volatile global market, proliferation of new financial products and changing environment of
regulatory system (Koch and MacDonald, 2009). It is a dynamic and comprehensive framework that helps
banks and financial institutions to measure, monitor and manage the market risk (Consiglio, Cocco and Zenios,
2008). Under this system, structure of balance sheet is managed in proper way to ensure that the net earnings
from interest are maximized and risks are minimized.
The ALM system has various functions to manage risks such as liquidity risk management, market risk
management, trading risk management, funding and capital planning, profit planning and growth projection
(Kosmidou and Zopounidis, 2004). It enables the banks to take business decisions in a more informed
framework through considering risks. It is an integrated approach that covers both types of amounts financial
assets and liabilities with the complexities of the financial market.
Justification of Research
In present scenario, ALM is important for the banking industry due to deregulation of interest regime. It helps to
assess the risks and manage the risks by taking appropriate actions. So, to understand the ALM process and
various strategies that are helpful for the banks to manage the market risk, this topic is selected. Along with
this, it would be beneficial for me to develop my knowledge regarding the ALM process, functions and practical
aspects through case study of HSBC bank.
Research Objectives
Following are the main objectives of the research:

To explore theoretical and practical aspects of asset liability management in banking industry

To identify the asset liability management strategies in context of HSBC bank

To recommend a framework to mitigate risk through ALM

Research Question
How assets liability management is important for reducing risks in commercial banking?
Literature Review

In this section, theoretical and practical aspects of asset liability management in banking industry will be
explored in context of HSBC bank.
Research Methodology
For this research, qualitative and exploratory research methodology is selected. Secondary data collection is
selected to collect data and information (Bergh and Ketchen, 2009). To attain the objectives of the research,
secondary data will be collected through case study of HSBC bank.
Potential Information Sources
In this research, journals, articles, research paper, books, company websites, annual report of the company
and other reliable and authentic sources will be used to collect secondary data and information.
Potential Difficulties
The researcher might face various difficulties during the research regarding the authenticity of sources,
reliability and validity of collected information, completing the research in limited time and cost.
We hope that you
References
Bergh, D. D. and Ketchen, D. J. (2009) Research Methodology in Strategy and Management. UK: Emerald
Group

Publishing.

Consiglio, A., Cocco, F. and Zenios, S. A. (2008) Asset and liability modelling for participating policies with
guarantees.
Koch,

T.

European
W.

and

Journal

MacDonald,

S.

of
S.

Operational
(2009)

Bank

Research,
Management.

186(1),
USA:

p.

Cengage

380-404.
Learning.

Kosmidou, K. and Zopounidis, C. (2004) Goal programming techniques for bank asset liability management.
Germany: Springer.