In late 2009, FMS conducted an ALM Model survey of banks, thrifts, and credit unions to attempt to ascertain current practices among users of ALM Models...an increasingly scrutinized component of institutional operations.
The survey attracted 205 respondents, with the overwhelming majority coming from commercial banks. A few highlights:
- Somewhat surprisingly, only 53 percent indicated that the CFO was the person responsible for ALM modeling and reporting
- Not surprisingly, but somewhat disappointing and a sign of the regulatory climate, the most common use of the model is to “satisfy regulatory requirements”. The second most common use was “overall income and balance sheet management”
- The majority of respondents do not model off balance sheet positions
- “Developing subjective assumptions,” by far, consumes the majority of modeling time
- There’s a fairly even split between running the model on a quarterly (51%) or a monthly (43%) basis
You can view the complete results from the survey below.
| | | What is your organization's charter type? | |
| Commercial bank or FDIC savings bank | 70 % | Credit union | 9 % | Thrift or OTS savings bank | 21 % |
| What is the asset size of your institution? | |
| Less than $100M | 10 % | $101-249M | 21 % | $250-499M | 22 % | $500-999M | 21 % | $1B or Greater | 25 % |
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Are you currently running an IRR or ALM Model, either in-house or outsourced? | |
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| What is the job title (function) of the person responsible for your IRR/ALM modeling & reporting? | |
| CFO | 53 % | Controller | 17 % | Financial Analyst | 6 % | ALM Specialist | 2 % | ALM Analyst | 3 % | Other | 19 % |
| How sophisticated does your organization consider itself to be with the IRR/ALM process? | |
| Novice | 0 % | Average | 33 % | Above average | 43 % | Advanced | 21 % | Extremely sophisticated | 3 % |
| What is the primary use of your current IRR/ALM model. (Please choose the top 3 uses from the following) | |
| Satisfy regulatory requirements | 72 % | Overall income and balance sheet management | 66 % | Management reporting | 49 % | Budgeting and forecasting | 49 % | Income projections | 34 % | Liquidity management | 25 % |
| Who are the primary users of your IRR/ALM model? (Check all that apply) | |
| ALCO | 92 % | Senior Mgmt. | 82 % | Board | 59 % | C level executives | 15 % | Department or division heads | 9 % | Marketing | 2 % | Retail | 2 % | Other | 1 % |
| Do you currently model Off Balance Sheet positions? (Check all that apply) | |
| I do not model Off Balance Sheet positions | 61 % | Unfunded loan commitments | 19 % | Liquidity issues | 17 % | Liquidity contingencies | 17 % | Rate swaps | 15 % | Open lines of credit | 14 % | Purchased caps or floors | 8 % | Other contingent balance sheet items | 7 % | Unsettled investment transactions | 4 % |
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What consumes the majority of your modeling time? (Choose the 3 most time consuming) | |
| Developing subjective assumptions | 68 % | Importing loan and deposit data | 41 % | Offered rate updating | 39 % | Balancing to the GL | 37 % | Reporting | 25 % | Bonds/investments data input | 19 % | Calculating time of the model | 16 % | Liquidity issues | 13 % | Other | 8 % |
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Approximately how often do you run your current IRR/ALM model? | |
| More than once a month | 5 % | Monthly | 43 % | Quarterly | 51 % | Less than once a quarter | 1 % |
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| How long does it take your model operator to load and run each run of your model? | |
| 0 – 2.0 hrs | 17 % | 2.1 – 4.0 hrs | 29 % | 4.1 – 6.0 hrs | 17 % | 6.1 – 8.0 hrs | 18 % | more than 8 hrs | 20 % |
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Main Question: What is your approximate annual IRR/ALM software cost? | In-house expenses (Please include depreciation and maintenance expenses but not salaries) | |
| Mean | $20,663.00 | Median | $5,000.00 |
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| Outsourced expenses (Total cost) | |
| Mean | $28,309.00 | Median | $8,800.00 |
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| If you use consulting services from your model vendor in addition to your modeling, please specify which services are provided below: (Check all that apply) | |
| I do not use consulting services from my model vendor | 55 % | Interpretation of model output | 27 % | Balance sheet strategy | 25 % | Investment | 19 % | Liquidity | 17 % | Strategic planning | 15 % | Risk mitigation | 14 % | Capital planning | 12 % | Other | 6 % |
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This poll only reflects the opinions of those who chose to participate and is not scientific. The results should not be considered representative of either FMS member's opinions in general, or the industry as a whole.