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In recent years, Afi has cemented its position as a benchmark advisor and consultant in the asset and liability management (ALM) field within the Spanish banking sector.
Our proposition is currently articulated around the four elements that enable our clients to manage, measure, asset and control their interest rate, liquidity and foreign exchange risks end to end:
- ALM procedures./strong>
- End-to-end ALM models and specific client behaviour models.
- Technology for improving ALM information management.
- Proprietary ALM solution (QALM).
All of which in a manner that is responsive to the most stringent regulatory requirements, emerging management needs in uncharted economic and financial territory and increasingly demanding supervisory expectations.
In the procedural area, we advise on organisational matters, committees, policies, action strategies and control procedures, on the definition of indicators, valuation methodologies, limits, internal information and on the information that has to be generated for regulatory and oversight compliance purposes.
While our procedure advisory offering is linked to Afi’s long-standing participation in our clients’ ALM committees, our model offering has been evolving in recent years in parallel with the implementation of more powerful ALM tools and increasing regulatory and supervisory demands, particularly for significant entities, so as to enhance their understanding of balance sheet performance in different interest and exchange rate scenarios. Our development in the model field has cemented Afi’s current position as the benchmark consultant in overall balance sheet modelling and specific customer behaviour modelling with a view to fortifying AML models. Estimation of the duration of sight deposits, the prepayment of mortgage loans or the cancellation of term deposits ahead of maturity are some of the behavioural models in which Afi currently has proven expertise and experience, with significant and less significant entities alike.
QALM
To address the need for more powerful ALM models and increasingly burdensome regulatory and supervision requirements it is essential to have access to and be able to manage more granular information with a far higher number of attributes or variables in order to develop reliable and sufficiently traceable balance sheet and customer behaviour models. At Afi we have a team of professionals dedicated to helping financial institutions with the task of extracting the necessary information, building databases to support the management of interest rate and liquidity risk and developing management and regulatory reports, framed by the fastest and most efficient information processing technology and tools.
Thanks to our deep knowledge of how to enhance ALM information management procedures, models and technology, we realised we needed to develop a proprietary ALM solution to round out our ALM consultancy offering. Together with Quantitative Risk Research, Afi developed its own ALM management tool - QALM - which is capable of generating projections under multiple scenarios in a more effective and efficient manner. One of its most compelling attributes is the ability to execute all calculations at a more granular level (contract, transaction) with optimal performance and faster execution times. Indeed, the performance it offers cannot be matched by any other application in the market.
Noteworthy characteristics:
- It facilitates highly flexible data management, with scope for adaptation for different types of input. On the user side of the equation, there are validation controls, designed to help preserve data quality, without jeopardising its speed or user-friendliness.
- It is an intuitive and very user-friendly application, supported by a full user manual and process manuals written to facilitate users’ everyday tasks.
- It is a multi-entity tool, so that it can be used with several independent balance sheets and scenarios and can be configured for management by users with different profiles and roles.
- It is a modern tool: every aspect was created from zero. It can handle any market scenario (e.g. negative interest rates) and factors in the latest regulatory requirements for customer behaviour models.
Today, QALM is the most widely adopted ALM application in Spain, with over 15 implementations at significant and less significant entities alike. The success of our solution in our home market has paved the way for marketing the product elsewhere in Europe and in Latin America and Asia.