ALM is a subject that has constantly evolved over the years.  It is expected that the knowledge level of the credit union personnel responsible for ALM evolve as well. ALM is a process and involves more than simply reporting on ALM result or just having an ALLL Policy

Here are some key points to remember relative to ALM:

  • ALM is the process of coordinating actions to control the credit union’s risk and reach it financial goals;
  • Every action taken by the credit union sooner or later affects the ALM position;
  • Good ALM measurement and management processes are a must;
  • The ALM Policy sets the guidelines for the ALM process including key measurements; and
  • The “red zone” shows whether the credit union is in compliance with these measures.  If not, take action.

ALCO and the board should be aware of ratios or trends that may signal an existing or potential problem by analyzing the past, present, and future direction of the credit union.

ALCO should be alert for the appearance of “red flags”, investigate their sources, and if necessary, develop action plans to address the issues.

Asset-Liability Red Flags: More