Financial institution balance sheets are much more complex today than they were even ten years ago. And never has the existence of a sound Asset Liability Committee (ALCO) been more important.

Below are three components to building a sound ALCO.

Knowledgeable Members

Unless ALCO members work inside the FI, they are at a major disadvantage when it comes to knowing the business of finance. Therefore, the institution’s CEO, CFO and at least one other staff member should serve on the ALCO.

Staying on Task

Reiterate the primary focus of the ALCO – strategic balance sheet and earnings management – on a regular basis. An integral part of that will come from an understanding of key measurements the committee uses as targets.

Remaining Responsive

Becoming more comfortable and competent in the ALM process is necessary as your institution meanders a tumultuous climate toward an uncertain future. While the principles of managing assets and liabilities will remain the same, consumer behavior will fluctuate.

Your account holders make decisions based on a changing economy. And, it isn’t over yet. Cultivate a responsive environment inside the ALCO, keeping a consistent eye on the ebbs and flows so as to produce a consistent spread.