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in the banking industry
HBL’s Balance Sheet is the largest in the industry. The Bank’s liquidity is managed by the ALM Desk under guidelines and supervision of the ALCO (Asset & Liability Management Committee). The broad guidelines are to manage the book in line with international best practices and with regulatory standards, while simultaneously ensuring that profitability objectives are met.
The ALM’s functions includes ensuring day-to-day operational liquidity, as well as managing the balance sheet on a strategic basis. In terms of operational liquidity, the ALM Desk functions as the liquidity management center and ensures that all of the bank’s local and foreign currency obligations are met without fail.
Strategic liquidity management caters to the management and structuring of the balance over the business cycle, with appropriate risk management tools to ensure that the balance sheet is robust enough to meet contingencies or market disruptions. This task includes the proactive management of Interest Rate Risk in the Banking Book (IRRBB), a key tenet of Basel standards, requiring actively accumulating, holding, and laying off interest rate risk in the banking book portfolio to ensure that the bank is positioned for the expected future direction of interest rates.
In addition, the Desk works with other businesses to ensure that in all the Bank’s products, Interest Rate and Liquidity Risks are adequately captured and priced accordingly. The Bank’s businesses require benchmark deposit and loan pricing on a daily basis to ensure that the liabilities and assets that are being booked are priced in line with the market and for this the ALM Desk provides reference pricing across the bank daily for both local and foreign currency.
As part of its activity, the ALM Desk manages a large asset book (the largest in the Bank) primarily covering Pakistani Rupee Government Fixed Income Securities (Treasury Bills, Pakistan Investment Bonds - Fixed & Floating Rate, and Government Ijara Sukuks). These are invested in for the purpose of meeting statutory liquidity guidelines as required by the central bank (State Bank of Pakistan) as well as to deploy surplus liquidity generated by the Bank. As part of this activity, the Desk actively participates in the auctions of Government Securities. The activities of the Desk include making markets in the short-dated domestic fixed income and money markets.
The Bank also maintains a Foreign Currency balance sheet, denominated primarily in US Dollars.
The Structured Products Desk offers risk management solutions to clients and counterparties of the bank. The Structured Products Desk is tasked with managing, designing and launching products that make use of derivatives to create a specific set of risk-return profiles for clients. Structured Products not only supports the local client-facing businesses but is also actively developing a suite of products for our foreign branches so that our customers across the network are able to acquire hedges for their existing risk or participate in return profiles that are suited to their risk appetite.