Explain maximum difference between assets and liabilities

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Assignment

The best time to plan for a crisis is before it occurs, certainly not when you're in the midst of one. Basel III has a new framework for managing bank liquidity.The liquidity coverage ratio (LCR) is for a short term scenario. The Net Stable Funding Ratio (NSFR) is a longer term structure. Both address liquidity mismatches.

Banks will induce stress scenarios that include partial loss of financing, rating downgrades, and loss of equity value. Asset/Liability Management (ALM) for banks is dependent on the safeguards that the institution has enough cash on hand to meet all the commitments in any conceivable situation. The lessons learned can help any business to minimize financial or physical damage.

Requirements

For this assignment, select a short term (30 days or less) and a long term (1 year) financial crisis in a business you are familiar with. Investigate possible scenarios.

Keeping in mind that the GAP limit is the maximum difference between assets and liabilities, set the GAP limit and formulate at least two GAP management strategies based on your selections.

Your paper should be 1 - 3 pages in length.

Reference no: EM131205948

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