3+1 Tools to keep your ALM balanced

What Is Asset Liability Management?

Asset Liability Management (ALM) represents a sophisticated approach to maintaining financial stability within a credit union or community bank. It is the process of managing assets and liabilities to mitigate risks to an enterprise, focusing on two key financial aspects: the net interest margin (NIM) and the economic value of equity (EVE). These considerations are vital for understanding the overall financial position and ensuring that the organization can weather fluctuations in market conditions.

An effective and comprehensive ALM framework guides and governs the processes that must be in place as part of the overarching strategy. This framework requires not only board-level approval but also meticulous documentation, robust testing, and third-party verification to ensure accuracy and compliance.

In essence, ALM is more than a mere balancing act; it's a structured and strategic approach to financial management. By following best practices, credit unions and community banks can ensure that their ALM framework is in proper order, helping to safeguard against unforeseen challenges and aligning with organizational goals and regulatory requirements.

As we delve into the complexities of ALM, we will explore some of the modern strategies, tools, and innovative approaches such as the Quilo Network, that community banks and credit unions can utilize to ensure they are at the forefront of ALM best practices.

Basic ALM Balancing Strategies

1.Gap Analysis:
What It Is: Gap analysis involves calculating the difference between interest-sensitive assets and liabilities for various time intervals. This provides an immediate snapshot of interest rate risk.

Positives: Easy to implement and provides a quick overview of risk.
Negatives: Too simplistic for complex portfolios, ignoring market value changes and the effect of non-parallel interest rate shifts.

2. Static Spread Analysis:
What It Is: This method examines the spread between the average yield on assets and the average cost of liabilities.

Positives: Useful for assessing the profitability of the bank or credit union.
Negatives: May not fully capture the complex interactions between assets and liabilities, especially during volatile market conditions.

Advanced ALM Balancing Strategies

1. Duration Analysis:
What It Is: Duration analysis considers how changes in interest rates affect the market value of assets and liabilities over time. It provides a more nuanced understanding of interest rate risk.

Positives: Allows for a more complex view of how different assets and liabilities respond to interest rate changes.
Negatives: Requires more sophisticated tools and expertise, which might be challenging for smaller institutions.

2. Scenario Analysis and Stress Testing:
What It Is: Through the use of predictive modeling and simulation, these methods explore how various economic scenarios and stress events would impact the balance sheet.

Positives: Helps in uncovering hidden risks and testing the resilience of the ALM strategy.
Negatives: Complex and resource-intensive, requiring expert knowledge and tools.

3. Integrated Risk Management:
What It Is: Aligning ALM with other risk management processes, such as liquidity and market risk, offers a holistic view of the institution's risk profile.

Positives: Provides a comprehensive understanding of all risks involved, enabling better decision-making.
Negatives: Requires careful coordination and robust systems to manage, potentially challenging for smaller institutions.

ALM Software Tools and Reviews

There are various software tools available today that facilitate the ALM process. Let’s take a look at the most prominent players in the market:

Oracle Financial Services Analytical Applications (OFSAA): 
Known for its flexibility, OFSAA offers comprehensive ALM solutions. Users often praise its ability to manage large data sets and create customizable reports.


  • Flexibility: OFSAA is known for its flexible framework, allowing customization to suit individual needs and requirements.
  • Large Data Handling: It can manage extensive data sets, accommodating the needs of both small and large institutions.
  • Comprehensive Solutions: Offering a wide array of ALM solutions, OFSAA provides a full suite of tools for risk management and analysis.


  • Complexity: The flexibility of OFSAA may lead to a steeper learning curve, making it potentially challenging for new users.
  • Cost: Being a comprehensive solution, OFSAA might be expensive for smaller institutions.

FIS® Balance Sheet Manager: 
FIS® Balance Sheet Manager (formerly Ambit Focus) provides robust analysis and real-time insights. Customers commend its user-friendly interface and reliable support.


  • User-Friendly Interface: Known for an intuitive design, FIS Ambit allows users to get started with minimal training.
  • Real-time Insights: It provides instant access to vital data, helping to make informed and timely decisions.
  • Reliable Support: Customers often mention satisfaction with the quality of support they receive, reducing downtime and aiding in problem-solving.


  • Integration Challenges: Some users have reported difficulty in integrating FIS Ambit with existing systems, which can slow down the implementation process.
  • Limited Customization: While user-friendly, the platform may lack some advanced customization options, potentially limiting its application for more complex ALM strategies.

Moody's Analytics RiskConfidence™ ALM: 

With robust risk modeling and multi-scenario capabilities, this platform has garnered positive reviews for its accuracy and scalability.


  • Robust Risk Modeling: With sophisticated risk modeling tools, this platform offers accurate insights into various risk factors.
  • Multi-Scenario Capabilities: It allows for multi-scenario analysis, enhancing the ability to foresee and prepare for potential future developments.
  • Scalability: Moody's Analytics RiskConfidence™ can be scaled to meet the needs of various institution sizes, making it versatile.


  • Cost: Similar to OFSAA, the complexity and range of features might lead to higher costs, making it less accessible for smaller banks and credit unions.
  • Complexity: The platform's advanced features may also require more time and expertise to master, which could be a barrier for some institutions.

The Quilo Network

The Quilo Network introduces a new and innovative approach to ALM by enabling community banks and credit unions to tap into a broader network of financial opportunities. 

How does it work? 
The Quilo Network serves as a hub where participants can syndicate fractions of loans they originate out or participate in funding fractions of different types of approved loans the choose. Participants in the network can simply define their terms and the platform handles everything else, executing transactions in real time at the point of origination.

Participants in the Quilo Network can:

  • Syndicate portions of the loans they originate, making these available for funding by other network participants.
  • Contribute to funding fractions of a diverse range of approved loans that align with their asset preferences and risk profiles.

How can you include the Quilo Network in your current ALM strategy? 
Setting up Quilo is extremely simple. Check out the video below where we go through the setup of a Credit Union that wants to extend their ALM strategy to include more loans.


The landscape of ALM strategies ranges from basic tools, suitable for smaller or less complex institutions, to advanced methodologies that provide a more nuanced and comprehensive understanding of risk. While the advanced strategies offer more detailed insights, they can be resource-intensive and may require more sophisticated tools and expertise.

Choosing the appropriate strategy or combination of strategies depends on the specific needs, capabilities, and risk profile of the institution. With a clear understanding of these strategies, community banks and credit unions can create an ALM framework that aligns with their goals, helping to ensure financial stability and resilience in a dynamic economic environment.

ALM is no longer just a basic financial exercise.

In today's complex financial landscape, balancing assets and liabilities requires a multifaceted approach that incorporates advanced strategies, cutting-edge tools, and innovative networks like the Quilo Network. By staying ahead of the curve and embracing modern ALM practices, community banks and credit unions can position themselves for sustainable growth and resilience in an ever-changing market.

Book a call with us today to see how Quilo can help you improve your current ALM strategy!


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