💥TOPICS FOR OUR COURSES

💥What Is Liability Management?

🔔Liability management is the practice by banks of maintaining a balance between the maturities of their assets and their liabilities in order to maintain liquidity and to facilitate lending while also maintaining healthy balance sheets. In this context, liabilities include depositors’ money as well as funds borrowed from other financial institutions.

🔔 A bank practicing liability management looks after these funds and also hedges against changes in interest rates. A bank can face a mismatch between assets and liabilities because of illiquidity or changes in interest rates; and liability management reduces the likelihood of a mismatch.

✅Liability management is the process of managing the use of assets and cash flows to reduce the firm’s risk of loss from not paying a liability on time.
✅Well-managed assets and liabilities involve a process of matching offsetting items that can increase business profits.
✅The asset-liability management process is typically applied to bank loan portfolios that may offer fixed-term products such as CDs and loans but also demand deposits and lines of credit.
✅Defined-benefit pension plans may also use liability management to ensure it does not experience a cash shortfall for paying its future and current obligations.

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