ALM practices, multiple uncertainties and monopolistic behavior: a microeconomic study of banking decisions

Antonio Ruiz Porras ()
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Antonio Ruiz Porras: Departamento de Metodos Cuantitativos. Universidad de Guadalajara, CUCEA. Periferico Norte 799, Nucleo Universitario Los Belenes, 45100, Zapopan, Jalisco, Mexico

EconoQuantum, Revista de Economia y Finanzas, 2011, vol. 8, issue 2, 163-181

Abstract: We study the decisions that a monopolistic bank takes to achieve risk management and profit objectives. The bank faces liquidity and solvency risks because loans may not be repaid and because unexpected deposit withdrawals may occur. The Asset-Liability-Management (ALM) banking model shows that compromise solutions are necessary to deal with the tradeoffs between liquidity management and profitability. It also shows that asset management practices increase profits. Moreover it shows that liability management practices and market power support profitability. Finally, the model confirms that banks should undertake long-term risky investments when depositors trust the viability of the asset transformation process.

Keywords: Banking; ALM; multiple uncertainties; monopolistic behavior. (search for similar items in EconPapers)
JEL-codes: D81 G21 G32 L21 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:qua:journl:v:8:y:2011:i:2:p:163-181

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