Iranian Journal of Finance

Current Issue

By Issue

By Author

By Subject

Author Index

Keyword Index

About Journal

Aims and Scope

Editorial Board

Publication Ethics

Indexing and Abstracting

Related Links

FAQ

Peer Review Process

News

Terms and conditions of submitting an article

Journal Forms

Guide for Authors

Asset-Liability Management (ALM) Following Liquidity Management Approach Based on Goal Programming in the Commercial Bank

Document Type : Original Article

Authors

1 Ph.D. Candidate, Department of Financial Management, Faculty of Management and Economics, University of Sistan and Baluchestan, Zahedan, Iran.

2 Associate Prof., Department of Financial Management, Faculty of Management and Economics, University of Sistan and Baluchestan, Zahedan, Iran.

3 Prof., Department of Financial Management, Faculty of Management, University of Tehran, Tehran, Iran.

Abstract

Asset-liability management (ALM) helps managers achieve their respective objectives by surveilling and controlling the ways through which resources are obtained and allocated. Furthermore, with the help of liquidity management, which sets the required cash by banks for fulfilling costs and other needs (e.g. the cash requested by depositors), ALM controls the risk. In addition, ALM helps managers realize profitability and efficiency of the bank through the application of goal programming (GP) whereby multiple objectives are simultaneously considered when making decisions.
In the present research, upon collecting the required data and information, acquiring opinions of experts at a sample bank, and investigating balance sheet of the bank while considering respective constraints, orders of priority of objectives were determined. The results indicated consistency of some items in the balance sheet, such as cash inventory and liability to Central Bank with those set by the model. On the other hand, when it came to some other items, including receivables from the government and credited facilities to public sector, the observed growth was in line with that anticipated by the model. In the meantime, for most items of the balance sheet, including termed deposits and other deposits, investments, and joint activities, the model suggested variable yet positive growths; the growth was higher in demand deposits which are known as less expensive resources, indicating facts about Iranian banking system and Iranian economy where communities are making greater deals of effort to attract this sort of resource.

Keywords

References
Adam, A. (2007). Handbook of aaset and liability management: from models to optimal return strtegies. John Wiley and Sons.
Alicia, G.-H., Sergio, G.,  &Daniel, S. (2009). What Explains the Low Profitability of Chinese Banks? Banco de Espana Working Paper.
Apătăchioae, A. (2015). The Performance, Banking Risks and their Regulation. Procedia Economics and Finance, 20, 35-43.
Bagheri, H. (2008). HYPERLINK "https://jfr.ut.ac.ir/article_19080_en.html" Analysis of factors affecting the profitability of commercial banks (Case Study: Bank Refah) . Financial Research Journal, 8, 1, 3-26.
Baker, V. (1978). Asset/liability management (V): A model asset/liability management policy in Banking. No. 1, LXX, 82-88.
Bakhtiyari, H. (2006). Effective ways of banks' liquidity management. Quarterly auditor. 1(8). PP 86-94.
Charnes, A., & Cooper, W.W. (1961). Management Models and Industrial Applications of Linear Programming. John Wiley & Sons, New York.
Charnes, A., Cooper, W.W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2, 429–444.
Charlotte, M. B. (2009). Three important committee structure. American's Community Bankers, 12.
Chien-Chiang, L., Meng‐ Fen, H., & Hua‐Wei, D. (2012). How Does Foreign Bank Ownership in the Banking Sector Affect Domestic Bank Behaviour? A Dynamic Panel Data Analysis. Bulletin of Economic Research, 64, 86-108.
Chirwa, E. W. (2003). Determinants of commercial banks' profitability in Malawi: a co-integration approach. Applied Financial Economics, 13, 8, 565-571.
Claudiu, T. A. (2015). Banks's profitability and financial soundness indicators: a macro-level investigation in emerging countries. Procedia Economics and Finance, 23, 203-209.
Dermine, J., & Youssef, F. B. (2002). Asset & Liability Management: A Guide to Value Creation and Risk Control. London, Great Britain: Pearson Education Limited.
Dietrich, A., & Wanzenried G. (2011). Determinants of Bank Profitability before and During the Crisis: Evidence from Switzerland. Journal of International Financial Markets, Institutions and Money, 21, 3, 307-327.
EN Bank. (2008). Asset-Liability Management and Liquidity Risk in Financial Institutions. Department of Risk Studies and Banking of the EN Bank. Fara Sokhan Press.
Fotios, P., & Kyriaki, K. (2007). Factors Influencing the Profitability of Domestic and Foreign Commercial Banks in the European Union. Research in International Business and Finance, 21, 2, 222-237.
Giokas, D., & Vassilogou, M. (1991). A goal programming model for bank assets and liabilities management. European Journal of Operational Research, 50, 48-60.
Ghodsipour, SH. (2005).   HYPERLINK "javascript:void(0)"  Analytical hierarchy process (AHP) . Amirkabir University, Tehran, Iran. Fourth Edition.
Halim, B.A., Karim, H.A., Fahami, N.A., Mahad, N.A., Nordin, S.K., & Hassan, N. (2015). Bank Financial Statement Management using a Goal Programming Model. Procedia - Social and Behavioral Sciences, 211, 498 – 504.
Halkos, G. E., & Georgiou, M. N. (2005).   HYPERLINK "https://ideas.repec.org/a/taf/apfelt/v1y2005i5p293-296.html" Bank sales, spread and profitability: an empirical analysis.   HYPERLINK "https://ideas.repec.org/s/taf/apfelt.html" Applied Financial Economics Letters, Taylor and Francis Journals, 1(5), 293-296.
Ignizio, James P. (1982). Linear Programming in Single and Multiple Objective Systems. PrenticeHall, rentice‐Hall, Inc., Englewood Cliffs, N.J. 07632.
Ismal, R. (2010). Strengthening and improving the liquidity management in Islamic banking. Humanomics, 26(1). 18-35.
Islami bidgoli, G. R., Mehregan, M. R., & Golami, P. (2011). Optimal management of assets in banks using fuzzy AHP and goal programming: case study in Bank A (85-87 years). Financial Engineering and Management of Securities, 3, 9, 23-44.
Kang, H. P., & William, L. W. (2006). Profitability of Korean Banks: Tests of Market Structure versus Efficient Structure. Journal of Economics and Business, 58, 3, 222-239.
Khatami Firouzabadi Seyed Mohammd, A., & Zargham boroujeni, H. (2004). Quantitative analysis for management. (Taylor B. W. Trans.). Allameh Tabataba’I University Press.
Kosmidou, K., & Zopounidis, C. (2004). Goal Programming Techniques for Bank Asset Liability Management. (Applied Optimization) Hardcover, Springer.
Kyriaki, K., & Constantin, Z. (2004). Goal programming techniques for bank asset liability management. China: Springer Science.
Kyriaki, K., Fotios, P., & Jordan, F. (2004). Linking Profits to Asset-Liability Management of Domestic and Foreign Banks in the UK. Applied Financial Economics, 14, 18, 1319-1324.
Laurence, P., & Jan, k. (2013). What drives bank earnings? Evidence for banking sectors. Applied Economics Letters, 20, 11, 1062-1066.
Leonardo, G., & Michela, S. (2014). Diversification and bank profitability: A nonlinear approach. Applied Economics Letters, 21:6, 438-441.
Marijana, Ć., Klime, P., & Sandra, P. (2014). Profitability Determinants of the Macedonian Banking Sector in Changing Environment. Procedia -Social and Behavioral Sciences, 44, 406-416.
Marine, C.-H., William, G., Jacques, J., & Raimondo, M. (2015). Asset and Liability Management for banks and insurance companies. US: John Wiley & Sons, Inc.
Mehregan, M. (2009‎). Decision making models with several objectives.‎ Tehran: Tehran University-Management Deprtement.
Mohammadi, R., & Sherafati, M. (2015). Optimization of Bank Liquidity Management using Goal Programming and Fuzzy AHP. Research Journal of Recent Sciences, 4, 6, 53-61.
Momeni, M. (2010). New Research Topics in Operations. Tehran: Momeni Publication. [In Persian]
Monnie, B. (2003). Liquidity and Asset Liability Management in Savings Services for the Poor. Washington D.C: PACT.
Moorad, C. (2011). An introduction to banking: liquidity risk and asset–liability management. West Sussex: John Wiley & Sons Ltd.
Moshiri, E., & Karimi, M. (2008).   HYPERLINK "https://jfr.ut.ac.ir/article_19396_en.html" Asset- Liability Management at Banking System: A proposed Optimization Model, Using a Jointly Combination of GP and AHP Approach, Case Study: Karafarin Private Bank. Financial Research Journal, 9, 1, 89-114.
Omrani, M., & Naji Azimi, Z. (2016).   HYPERLINK "https://jemr.khu.ac.ir/article-1-1438-en.html&sw=" Assets and Liabilities Management Modeling, With Liquidity Risk Management Approach in the Banking System Using Fuzzy Goal Programming. Journal of Economic Modeling Research, 7, 25, 91-128.
Pourzarandi, M. E., Omrani, M., & Kavand, M. (2012). Designingan Model of Measurement of liquidity risk in the banking system (Case study: Mellat Bank). Biquarterly Journal of Iran's Economic Essays, 9, 18, 135-163.
Tektas, A., Ozkan-Gunay, E. N., & Gunay, G. (2005). Asset and liability management in financial crisis. The Journal of Risk Finance, 1526-5943.
  HYPERLINK "https://www.researchgate.net/profile/R_Umarani" Umarani , R., & Jayanthi, M. (2015). An Analysis of Asset-Liability Management in Indian Banks. International Journal of Business and Administration Research Review, 1, 11, 179-183.
Yong, T. (2015). The impacts of risk and competition on bank profitability in china. Journal of International Financial Markets, Institutions and Money, 40, 85-110.
Zenios, S. & Ziemba, W. (2006). Handbook of asset liability management. Elsevier.
Ziemba, W. (2007). Handbook of asset liability management: Application and case studies. Amsterdam: Elsevier.
Iranian Journal of Finance
Volume 2, Issue 3
July 2018
Pages 25-48
Files
Share
How to cite
Statistics