Canonical Correlation Analysis of Asset-Liability Management of Indian Banks

Mihir Dash () and Ravi Pathak
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Ravi Pathak: Standard Chartered Bank, India

Journal of Applied Management and Investments, 2016, vol. 5, issue 2, 75-81

Abstract: Asset-liability management is the simultaneous planning of all asset and liability positions for a bank, considering the different bank management objectives and the legal, managerial and market constraints, for the purpose of enhancing the value of the bank, providing liquidity, and mitigating interest rate risk. The framework of asset-liability management broadly covers the areas of interest rate risk, liquidity risk, exchange risk and credit risk. The present study uses canonical correlation analysis to assess the nature of asset-liability management of different bank groups. The results of the study indicate that, among the three groups, private banks had the most dynamic asset-liability management, with a strategy of active liability management. Public and foreign banks seemed to concentrate on fixed assets in their asset-liability management strategies, without actively involving other asset classes, thus bringing the possibility of liquidity and interest rate sensitivity issues in their asset-liability management.

Keywords: asset-liability management; canonical correlation; profitability; liquidity; interest rate sensitivity (search for similar items in EconPapers)
Date: 2016
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