ALM Technology Systems, 2023: Market Update and Vendor Landscape
The 2023 iteration of our ALM research report returns to the key themes highlighted by our 2021 industry report. In this update, we re-evaluate the complex ALM framework, which broadly comprises distinct segments that include funds transfer pricing (FTP), liquidity risk management (LRM) and reporting, capital and balance sheet optimization, and ALM analytics and quantification.
We examine the various challenges firms face as industry and regulatory standards push them to integrate their ALM operations and unify their ALM policies under a comprehensive internal strategy. Among the key trends we highlight is the renewed focus on LRM in the context of different types of institution and their specific liquidity dynamics. We also consider the adjacent focus on interest rate risk, including ‘straightforward’ interest rate risk.
In addition to our industry analysis, we also highlight trends in the regionally defined, fragmented vendor market. We explore the different ALM requirements that emerge from varying perspectives within an institution, from the standpoint of both the asset-liability committee (ALCO) and the treasury department. We make the distinction between ‘operational ALM’, which focuses on day-to-day ALM calculations, and ALM from a trading and hedging perspective. We also note the approach to ALM that closely aligns with regulatory reporting and compliance and, in addition to regional trends, we highlight the institution types and product and balance sheet strategies that drive different ALM requirements. Finally, we consider these trends through both operational and technological lenses, to determine how financial institutions and the vendor landscape are evolving under new pressures.
