Do you think each commercial bank should form ALCO

 Asset-Liability Management Committee (ALCO) is the core unit of a financial institution. So it is the basic need to form an ALCO to balancing the Asset- Liability Management. The ALCO will set a standard limits on borrowing in the

short-term markets and lending long-term instruments that controls over the financial risks and external events that may affect the bank's asset-liabilities position. It manages the risks to acceptable level by monitoring and sets the competitive prices between assets and liabilities to maintain the liquidity position of the company. Without an ALCO, a commercial bank may lose all positive financial opportunities and the bank must be faced by different types risk as like as financial crisis. So that it shout to be formed a ALCO for each commercial bank to manage the vulnerable financial position.

Do you think that, absence of good/effective ALM of a bank may lead it to different crisis jeopardizing image and foundation of the bank? Please elaborate your answer

In banking, asset liability management is the practice of managing the risks that arise due to mismatches between the assets and liabilities (debts and assets) of the bank. Banks face several risks such as liquidity risk, interest rate risk, credit and operational risk. Asset/Liability management (ALM) is a strategic management tool to manage Asset, Liability, spread of interest rate and liquidity risk faced by banks & Financial Institutions.

 In absence of good/effective ALM of a bank may lead it to following crisis:

1. Liquidity risk: the current and prospective risk arising when the bank is unable to meet its obligations as they come due without adversely affecting the bank's financial conditions.

2. Interest rate risk: The risk of losses resulting from movements in interest rates and their impact on future cash-flows. One of the primary causes are mismatches in terms of bank deposits and loans.

3. Currency risk management: The risk of losses resulting from movements in exchanges rates. To the extent that cash-flow assets and liabilities are denominated in different currencies.

4. Funding and capital management: As all the mechanism to ensure the maintenance of adequate capital on a continuous basis. (Usually a prospective time-horizon of 2 years).

5. Profit  planning  and  growth:  Profit  planning  is  required  to  make  a sufficient growth for the organization itself.

6. In addition, ALM deals with aspects related to credit risk as this function is also to manage the impact of the entire credit portfolio (including cash, investments, and loans) on the balance sheet. The credit risk, specifically in the loan portfolio, is handled by a separate risk management function and represents one of the main data contributors to the ALM team.

 So, it can be said undoubtedly that absence of good/effective ALM of a bank may lead it to different crisis jeopardizing image and foundation of the bank