In 2025, Asset and Liability Management (ALM) is no longer the quiet function operating behind the scenes. It has become a core pillar of strategic decision-making in banks, balancing profitability, liquidity, and risk under increasingly volatile market and regulatory conditions.
As interest rate cycles become more dynamic, liquidity risks intensify, and climate and macroeconomic shocks accelerate, the ALM function has emerged as a key line of defence and a strategic compass.
This article explores the state of ALM in 2025 and how banks can transform their ALM practices into a strategic asset. It also introduces Wolters Kluwer’s OneSumX for ALM as a critical enabler of modern ALM strategies through integrated data, real-time analytics, and regulatory compliance capabilities.
The New Reality of ALM: Volatility, Regulation, and Risk Convergence. Interest Rate Risk and Market Turbulence
After more than a decade of low interest rates, the global banking system has entered an era of monetary tightening, inflation shocks, and policy unpredictability. Interest Rate Risk in the Banking Book (IRRBB) has re-emerged as a top concern, demanding dynamic simulation models and strategic balance sheet steering.
Banks in 2025 are now:
Modelling multiple interest rate scenarios across geographies
Stress testing the impact of parallel and non-parallel rate shifts
Actively hedging through derivatives and matched funding strategies
Liquidity Risk and Basel IV
Liquidity risk has become more nuanced with evolving Basel IV requirements, the implementation of NSFR (Net Stable Funding Ratio) and LCR (Liquidity Coverage Ratio), and increasing scrutiny of contingent liquidity plans.
Supervisors now expect:
Intraday liquidity monitoring
Behavioural modelling of non-maturity deposits (NMDs)
Integration of stress scenarios into liquidity buffer strategies
Regulatory Convergence
ALM is no longer isolated from the broader regulatory landscape. It is deeply connected to:
ICAAP/ILAAP requirements
IFRS 9 and its implications on expected credit loss forecasting
ESG and climate risk regulation affecting asset-liability mismatches
Banks must adopt a holistic view of risk across capital, liquidity, interest rate, and ESG domains.
Strategic ALM: From Compliance to Optimization. Proactive Balance Sheet Management
Strategic ALM solutions allow banks to go beyond regulatory compliance. By optimizing asset-liability profiles, institutions can:
Protect Net Interest Margins (NIM)
Enhance funding stability
Align investment duration with liability structures
Dynamic simulation and optimization tools enable scenario-based decision-making that factors in business strategy, not just regulation.
2. Data Granularity and Behavioural Modelling
Accurate ALM now hinges on granular, high-quality data and behavioural assumptions. Banks must model:
Customer prepayment behaviour
Early withdrawal probabilities
Embedded options in retail and wholesale products
In 2025, behavioural assumptions are no longer static—they are validated, challenged, and refined in real time.
Intraday and Real-Time Risk Management
Legacy batch processes are being replaced by real-time ALM capabilities. Treasury and risk managers need access to intraday dashboards, scenario tools, and automated alerts to act decisively in volatile environments.
The Technology Mandate: Why ALM Requires Enterprise-Grade Infrastructure
As ALM evolves, spreadsheet-based and fragmented solutions expose banks to operational, compliance, and financial risk. The complexity of modern ALM demands:
Integrated data architecture across risk, finance, and treasury
Scenario engine capable of multi-dimensional stress testing
Audit trails and governance layers for regulatory scrutiny
Modular flexibility to adapt to new regulatory regimes
This is where Wolters Kluwer’s OneSumX for ALM provides significant strategic value.
OneSumX for ALM: An Enterprise Solution for Next-Gen Balance Sheet Management1. Integrated, Multi-Dimensional ALM Platform
OneSumX for ALM is a comprehensive solution that enables banks to manage and optimize their balance sheets under various risk and business constraints.
It provides:
Interest Rate Risk and Liquidity Risk measurement
Dynamic scenario simulation and stress testing
Behavioural modelling of non-maturity products
Forecasting and budgeting capabilities
Full alignment with regulatory reporting (NSFR, LCR, IRRBB)
Real-Time Analytics and Scenario Planning
The platform’s high-performance engine allows treasury teams to simulate thousands of forward-looking scenarios. These range from rate curve shifts to business-driven funding strategies, providing rapid insight into the impact on earnings, capital, and liquidity.
Banks can:
Optimize FTP (Funds Transfer Pricing)
Simulate hedging strategies
Test regulatory and internal stress cases
Visualize key metrics with interactive dashboards
Data Integration and Governance
OneSumX integrates seamlessly with upstream systems—core banking, treasury, risk, and finance. It supports:
Data lineage and quality checks
Regulatory data reconciliations
Centralized data governance and security
This unified view is critical for producing consistent, defensible ALM outputs under supervisory examination.
Future-Ready and Modular
Built on a modular architecture, OneSumX is designed to evolve. It can support:
ESG and climate risk ALM extensions
IFRS 9 and IRRBB integration
Basel IV and local regulatory requirements
Emerging risk indicators and KPIs
This adaptability ensures banks are prepared not just for today’s ALM challenges, but for tomorrow’s regulatory and strategic transformations.
Implementing Strategic ALM: A Framework for BanksStep 1: Define Strategic Risk Appetite
Boards and ALCOs must define tolerances for IRRBB, liquidity risk, and funding mismatches. These thresholds should drive limit-setting, business strategy, and hedging policies.
Step 2: Build an Integrated ALM Data Architecture
Unify data across sources into a single platform. Ensure data quality, traceability, and audit readiness. Automate ingestion pipelines where possible.
Step 3: Implement Dynamic Simulation Tools
Use platforms like OneSumX to build forward-looking simulations across rate environments, product strategies, and economic conditions. Go beyond static shocks to multi-path stress testing.
Step 4: Optimize Transfer Pricing and Capital Allocation
Use ALM outputs to refine FTP models, allocate capital efficiently, and incentivize business lines to act in alignment with risk-adjusted returns.
Step 5: Align ALM with Regulatory Reporting and Disclosure
Ensure ALM metrics are consistent with ICAAP, ILAAP, Pillar 3 disclosures, and supervisory expectations. Use a single platform to support internal and external reporting.
The Future of ALM: What’s Next?1. Climate Risk and Sustainable Balance Sheet Steering
Regulators are increasingly expecting banks to incorporate climate scenario analysis into ALM. This includes modelling the impact of transition and physical risks on deposit stability, loan prepayment behaviour, and funding costs.
AI and Machine Learning
AI-driven behavioural modelling is gaining traction, offering predictive insights into customer behaviour under various economic and climate conditions. While regulatory buy-in is still evolving, early adopters are gaining forecasting advantages.
Strategic Liquidity Optimization
Banks are developing internal liquidity optimization engines to dynamically manage collateral, pricing, and intraday positions. This moves ALM from a control function to a profit-enhancing centre.
Integration of ESG, ALM, and Risk Strategy
The convergence of ESG, capital, and liquidity considerations means ALM must interface seamlessly with sustainability strategies. Asset portfolios must be optimized not only for risk-return, but for sustainability-adjusted value.
Conclusion: A New Age of Strategic ALM
In 2025, Asset and Liability Management is a cornerstone of strategic and regulatory resilience. Banks that elevate ALM from a compliance task to a strategic enabler will be best positioned to navigate volatility, meet regulatory demands, and optimize performance.
Solutions like Wolters Kluwer’s OneSumX for ALM provide the infrastructure and intelligence needed to support this transformation. With its integrated data architecture, real-time analytics, and regulatory alignment, OneSumX is a platform built not just to comply, but to lead.
In a world where risk is dynamic and regulation is intensifying, your ALM strategy can seriously affect your competitive edge.
Read more:
Asset and Liability Management in 2025: Strategic Risk & Regulatory Convergence