When you work with Taylor Advisors for Balance Sheet Management, you’ll get a host of services and deliverables that help lead to a successful outcome. Our Balance Sheet Management service includes:
Quarterly Packets
We provide the assembly of a custom ALCO packet that includes all components of the balance sheet, including Capital, Liquidity, Interest Rate Risk, Loans, Deposits, and Investments. Additionally, there is an analysis and discussion of our Balance Sheet Monitoring tools to evaluate peers. We recognize all financial institutions are uniquely different and warrant a customized approach when addressing balance sheet challenges and opportunities.
Meeting Facilitation
Unlike ALM report providers, we spend our time analysing and interpreting the data instead of just delivering a report. The value we bring is in the holistic balance sheet evaluation. When a bank is evaluating a growth strategy, we can measure the impact to all balance sheet and risk positions, current and future.
Interest Rate Risk
Regulators may be concerned the ALM system does not reflect reality. Taylor Advisors helps ensure that the Interest Rate Risk (IRR) process is functioning properly in its goal of managing, monitoring, and controlling this risk.
Liquidity Management
With several financial institutions failing during the most recent crisis and credit quality concerns once again rising, the regulators have been reemphasizing the importance of a sound Liquidity management process and proactive contingency funding plans. We have been on the front-end of the market in developing and integrating contingency funding plans for our clients. Liquidity management is a dynamic process. It incorporates the bank’s strategic focus and profitability goals, while at the same time helping monitor vulnerabilities and manage risk. Some of these risks are quantifiable, such as interest rate and credit risk. Other risks need to be qualified, such as strategic risk. An annual review of the Liquidity Policy will be a perfect opportunity to update the sources of liquidity, assumptions, and incorporate any new strategic directions into the document and the models.
Liability Management
Difficulties with funding costs and/or deposit and loan pricing frustrations. Finding the right mix of funding sources for your balance sheet will be important, especially in interest rate or economic environments experiencing volatility in interest rates.
Capital Advising
We have been on the front-end of the market in developing and integrating contingency capital plans for our clients. This includes stress testing growth assumptions, credit assumptions, and sources and uses of capital, such as dividends. Constructive feedback from various regulatory agencies has allowed us to fine-tune the capital management process to ensure consistency with most recent guidance and adaptability to current market conditions.
An annual review of the Capital Policy is an ideal chance to update the forecasts, pro-formas, and assumptions, and incorporate any new strategic directions into the document and the models.
Other Services Include
- Assumptions Review
- Non Maturity Deposits, including
- Beta studies – the repricing of non-maturity deposits
- Decay study – the retention of non-maturity deposits
- Surge deposit – stress testing “hot money”
- Loan Assumptions
- Prepayment Speeds
- Loans at Floors
- Repricing of Floating Rate Loans
- Assumptions Stress Testing and Alternative Interest Rate Scenarios
- Assumptions Memo – Annual Interest Rate Risk Documentation
- Back-Testing Analysis – Annual Comparison of Model vs. Company Results
- Interest Rate SWAPS – Derivatives