Asset Liabilities Management Hdfc 2011

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A

PROJECT REPORT

ON ON “

“

ASSEST & LIABILITIES AND MANAGEMENT

OF

HDFC BANK

Project submitted in partial fulfillment for the award of degree

Project submitted in partial fulfillment for the award of degree of

of

MASTERS OF BUSINESS ADMINISTRATION

OF

JNTU

SUBMITTED BY

K V RAMANAIAH

H.T. NO: 10H51E0023

CMR ENGINEERING COLLEGE

(Affiliated to JNTUH)

Medchal Secunderabad-500014 Medchal Secunderabad-500014

(2010-2012)

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DECLARATION

I, the undersigned, hereby declare that the project report entitled

――(Assest&liabilities and management)

(Assest&liabilities and management)‖ carried out at (

‖ carried out at (HDFC Bank

HDFC Bank). Is my

). Is my

original work written and submitted by me in partial fulfillment of Master`s

Degree in Business Administration of (

JNTUHYDERABADJNTUHYDERABAD

University)

University).

. I

I also

also

declare that this project has not been submitted earlier in any other university or

institution.

Date:

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ACKNOWLEDGEMENT

I take this opportunity to extend my profound thanks and deep sense of

gratitude to the authorities of (

gratitude to the authorities of ( HDFC Bank)

HDFC Bank). For giving me the opportunity to

. For giving me the opportunity to

undertake this project works in their esteemed organization. I profusely thank Mr.

Company Guide Name (Designation)

My sincere thanks to Honorable secretary Sri K Suresh, (College Name)

principal Mr.---,

principal Mr.---, HOD Mr. Koteshwear Rao, and my project guide Mr.

HOD Mr. Koteshwear Rao, and my project guide Mr.

Koteshwar Rao. For the kind encouragement and constant support extended in

completion of this project work. From the bottom of

completion of this project work. From the bottom of my heart

my heart

I am also thankful to all those who have incidentally helped me, through

their valued guidance, co-operation and unstinted support during the course of my

project.

K V Ramanaiah

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ABSTRACT

Asset-Liability Management (ALM) can be termed as a risk management technique designed to earn an adequate return while maintaining a comfortable surplus of assets beyond liabilities. It takes into consideration interest rates, earning power, and degree of willingness to take on debt and hence is also known as Surplus Management.

But in the last decade the meaning of ALM has evolved. It is now used in many different ways under different contexts. ALM, which was actually pioneered by financial institutions and banks, are now widely being used in industries too. The Society of Actuaries Task Force on ALM Principles, Canada, offers the following definition for ALM: "Asset Liability Management is the on-going process of formulating, implementing, monitoring, and revising strategies related to assets and liabilities in an attempt to achieve financial objectives for a given set of risk tolerances and constraints."

The need of the study is to concentrates on the growth and performance of The Housing Development Finance Corporation Limited (HDFC) and to calculate the growth and performance by using asset and liability management. And to know the management of nonperforming assets.

To know financial position of The Housing Development Finance Corporation Limited (HDFC)

The burden of the Risk and its Costs are both manageable and transferable. Financial service firms, in the addition to managing their own risk, also sell financial risk management to others. They sell their services by bearing customers financial risks through the products they provide. A financial firm can offer a fixed-rate loan to a borrower with the risk of interest rate movements transferred from the borrower to the . Financial innovations have been concerned with risk reduction then any other subject. With the possibility of managing risk near zero, the challenge becomes not how much risk can be removed.

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INDEX

S.No: CONTENTS PAGE NO.

CHAPTER-1 1-13



INTRODUCTION

 Scope of the Study

 Objectives of the Study

 Needs and importants

 Methodology of the Study

 Limitations of the Study

CHAPTER-2 14-23  REVIEW OF LITERATURE CHAPTER-3 24-34  COMPANY PROFILE  INDUSTRIAL PROFILE CHAPTER-4 35-59  CONCEPTUAL FRAMWORK CHAPTER-5 60-85

 DATA ANALYSIS AND INTERPRITION

CHAPTER-6 86-90

 FINDINGS

 CONCLUSION

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CHAPTER-I

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INTRODUCTION

Asset Liability Management (ALM) is a strategic approach of managing the balance sheet dynamics in such a way that the net earnings are maximized. This approach is concerned with management of net interest margin to ensure that its level and riskiness are compatible with the risk return objectives.

If one has to define Asset and Liability management without going into detail about its need and utility, it can be defined as simply ―management of money” which carries value and can change its shape very quickly and has an ability to come back to its original shape with or without an additional growth. The art of proper management of healthy money is ASSET AND LIABILITY MANAGEMENT (ALM

The Liberalization measures initiated in the country resulted in revolutionary changes in the sector. There was a shift in the policy approach from the traditionally administered market regime to a free market driven regime. This has put pressure on the earning capacity of co-operative, which forced them to foray into new operational areas thereby exposing themselves to new risks. As major part of funds at the disposal from outside sources, the management is concerned about RISK arising out of shrinkage in the value of asset, and managing such risks became critically important to them. Although co-operatives are able to mobilize deposits, major portions of it are high cost fixed deposits. Maturities of these fixed deposits were not properly matched with the maturities of assets created out of them. The tool called ASSET AND LIABILITY MANAGEMENT provides a better solution for this.

ASSET LIABILITY MANAGEMENT (ALM) is a portfolio management of assets and liability of an organization. This is a method of matching various assets with liabilities on the basis of expected rates of return and expected maturity pattern

In the context of ALM is defined as ―a process of adjusting s liability to meet loan demands, liquidity needs and safety requirements”. This will result in optimum value of the same time reducing the risks faced by them and managing the different types of risks by keeping it within acceptable levels.

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RBI revises asset liability management guidelines

February 6/2012In the era of changing interest rates, Reserve Bank of India (RBI) has now revised its Asset Liability Management guidelines. Banks have now been asked to calculate modified duration of assets (loans) and liabilities (deposits) and duration of equity.

This was stated by the executive director of RBI, V K Sharma, and here today. He said that this concept gives banks a single number indicating the impact of a 1 per cent change of interest rate on its capital, captures the interest rate risk, and can thus help them move forward towards assessment of risk based capital. This approach will be a graduation from the earlier approach, which led to a mismatch between the assets and liabilities.

The ED said that RBI has been laying emphasis that banks should maintain a more realistic balance sheet by giving a true picture of their non performing assets (NPAs), and they should not be deleted to show huge profits. Though the banking system in India has strong risk management architecture, initiatives have to be taken at the bank specific level as well as broader systematic level. He also emphasized on the need for sophisticated credit-scoring models for measuring the credit risks of commercial and industrial portfolios.

Emphasizing on a need for an effective control system to manage risks, he said that the implementation of BASEL II norms by commercial banks should not be delayed. He said that the banks should have a robust stress testing process for assessment of capital adequacy in wake of economic downturns, industrial downturns, market risk events and sudden shifts in liquidity conditions. Stress tests should enable the banks to assess risks more accurately and facilitate planning for appropriate capital requirements.

Sharma spoke at length about the need to extend the framework of integrated risk management to group-wide level, especially among financial conglomerates. He said that RBI has already put in place a framework for oversight of financial conglomerates, along with SEBI and IRDA. He also said that at the systematic level efforts are being made to create an enabling environment for all market participants in terms of regulation, infrastructure and instruments.

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NEED AND IMPORTANTS OF THE STUDY:

The need of the study is to concentrates on the growth and performance of HDFC and to calculate the growth and performance by using asset and liability management and to know the management of nonperforming assets.

 To know financial position of HDFC

 To analyze existing situation of HDFC

 To improve the performance of HDFC

 To analyze competition between HDFC with other cooperatives.

IMPORTANTS OF THE STUDY:

Fees and

Charges:-Fees payable on the Credit Card by the Card

member:-The fees may vary for each Card member, and from offer to offer. member:-The same is communicated to the Card member at the time of applying for the credit card. The above fees as applicable are billed to the card account and are stated in the card statement of the month in which it is card charged.

 Annual Fees •

 Renewal Fees Cash Advance Fees

:-The Card member can use the Card to access cash in an emergency from ATMs in India or abroad.

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SCOPE OF THE STUDY:

In this study the analysis based on ratios to know asset and liabilities management under HDFC and to analyze the growth and performance of HDFC by using the calculations under asset and liability management based on ratio.

 Ratio analysis

 Comparative statement

 Common size balance sheet.

GEOGRAPHICAL SCOPE

:-The same problem was with the all other branches of HDFC Bank even out of the pune city. The management is conducting the same research on a big ground while my contribution is tiny. Though my sample size and geographical area was defined and confine to a particular territory but the application of output from the research are going to be wide

.

PRODUCT

SCOPE:- Studying the increasing business scope of the bank.

 Market segmentation to find the potential customers for the bank.

 To study how the various products are positioned in the market.

 Corporate marketing of products.

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OBJECTIVES OF THE STUDY

 To study the concept of ASSET & LIABLITY MANAGEMENTin HDFC

 To study process of CASH INFLOWS and OUTFLOWS inHDFC

 To study RISK MANAGEMENT underHDFC

 To study RESERVES CYCLE of ALM underHDFC

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METHODOLOGY OF THE STUDY

The study of ALM Management is based on two factors.

1. Primary data collection.

2. Secondary data collection

PRIMARY DATA COLLECTION:

The sources of primary data were

 The chief manager – ALMcell

 Department Sr. manager financing & Accounting

 System manager- ALMcell

Gathering the information from other managers and other officials of the organization.

SECONDARY DATA COLLECTION:

Collected from books regarding journal, and management containing relevant information about ALM and Other main sources were

 Annual report of the HDFC

 Published report of the HDFC

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LIMITATION OF THE STUDY:

 This subject is based on past data of HDFC

 The analysis is based on structural liquidity statement and gap analysis.

 The study is mainly based on secondary data.

 Approximate results: The results are approximated, as no accurate data is Available.

 Study takes into consideration only LTP and issue prices and their difference for

Concluding whether an issue is overpriced or under priced leaving other.

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CHAPTER-II

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Paper Title:-Sovereign Risk and Asset and Liability

Management Conceptual Issues(SRALM)

Authour:- G. Papaioannou, and Author Iva Petrova(2000)

Findings:-Country practices towards managing financial risks on a sovereign balance sheet continue to evolve. Each crisis period, and its legacy on sovereign balance sheets, reaffirms the need for strengthening financial risk management. This paper discusses some salient features embedded in in the current generation of sovereign asset and liability management (SALM) approaches, including objectives, definitions of relevant assets and liabilities, and methodologies used in obtaining optimal SALM outcomes. These elements are used in developing an analytical SALM framework which could become an operational instrument in formulating asset management and debtor liability management strategies at the sovereign level. From a portfolio perspective, the SALM approach could help detect direct and derived sovereign risk exposures. It allows analyzing the financial characteristics of the balance sheet, identifying sources of costs and risks, and quantifying the correlations among these sources of risk. The paper also outlines institutional requirements in implementing an SALM framework and seeks to lay the ground for further policy and analytical work on this topic.JEL

Paper Title :- Integrating Asset-Liability Risk Management with

Portfolio Optimization for Individual Investors II (IALRM)

Author :- Travis L. Jones, Ph.D.(2002)

Findings

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income levels and other constraints figure into the typical approach. However, not enough attention is given to the nature of an investor’s multiple time horizons and implications for cash flows. These are the future demands placed upon the portfolio. The risks that these demands will not be met need to be clearly understood in order to validate any asset allocation decision. This study presents an approach of incorporating MVO within a multi-horizon, asset-liability Management risk model. This approach allows for cash-flow matching of a portion of an investor’s portfolio within the optimization framework. This allows an individual’s portfolio to provide short-term cash flow, as needed, while also considering the longer-term demands on the portfolio.

Part Title :- Asset

&

liability management (

ALM)

modelling with

risk control by stochastic dominance.

Author name :- Xi Yang, Jacek Gondzi & Andreas Grothey(2001)

Findings:-An Asset Liability Management model with a novel strategy for controlling the risk of underfunding is presented in this article. The basic model involves multi-period decisions (portfolio rebalancing) and deals with the usual uncertainty of investment returns and future liabilities. Therefore, it is well suited to a stochastic programming approach. A stochastic dominance concept is applied to control the risk of underfunding through modelling a chance constraint. A small numerical example and an out-of-sample back test are provided to demonstrate the advantages of this new model, which includes stochastic dominance constraints, over the basic model and a passive investment strategy. Adding stochastic dominance constraints comes with a price. This complicates the structure of the underlying stochastic program. Indeed, the new constraints create a link between variables associated with different scenarios of the same time stage. This destroys the usual tree structure of the constraint matrix in the stochastic program and prevents the application of standard stochastic programming approaches, such as (nested) Benders decomposition and progressive hedging. Instead, we apply a structure-exploiting interior point method to this problem. The specialized interior point solver,

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object-oriented parallel solver, can deal efficiently with such problems and outperforms the industrial strength commercial solver CPLEX on our test problem set. Computational results on medium-scale problems with sizes reaching about one million variables demonstrate the efficiency of the specialized solution technique. The solution time for these non-trivial asset liability models appears to grow sub linearly with the key parameters of the model, such as the number of assets and the number of realizations of the benchmark portfolio, which makes the method applicable to truly large-scale problems.

Paper Title:- An investigation of asset liability management

practices in Kenya Commercial Banks(IALM)

Author:- Macharia, & Irungu Peter(2003)

Findings

:-Risk management practices in commercial banks are commonly known as asset liability management and it remains critical in ensuring safety of depositors' funds as well as investors' stake. Asset liability management is a requirement by the Central Banks of any country in order to ensure full compliance to the set risk management guidelines. This study was designed to establish the asset/liability management practices by Commercial Banks in Kenya and to find out the extent of asset-liability management by these banks. The study will be important to commercial banks, scholars and it will contribute more knowledge to the existing information on asset liability management. The population under study comprised of all Heads of Treasury Operations of the 43 Commercial Banks in Kenya. Census study was used because the population was relatively small for sampling and gave a better representation of the various risk management practices employed by various commercial banks as well as their asset liability management practices. Each respondent filled and submitted a self administered questionnaire that was dropped and picked later. The questionnaire responses were summarized and the results analyzed using Statistical data analysis programme (SPSS) to describe the relationship between the dependent and the independent variables. Findings were presented by way of charts, graphs

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employed both conventional and bank-specific asset liability management practices. Most banks considered credit/default risk to be the most critical of all financial risk exposures though some empirical evidence shows that foreign exchange risk is the most critical risk for most firms. Majority of the banks did not find the Kenyan currency market to be information efficient: speculation and forecasting techniques were extensively used by most of them. Regular and systematic appraisal of asset/liability management policies was a common practice amongst most banks. Most banks also indicated that their asset/liability management systems were governed by guidelines set by the management board which is a cross functional outfit covering all the major functions in the bank this showed that ALM is a highly strategic issue in the banks Most banks, regardless of their size, extensively utilized most of the conventional hedging instruments. Micro hedge approach, accounting and economic exposure measurement strategies, natural hedging and diversification were some of the most utilized strategies. Some hedging practices were considered by most banks to be more important than others. These included use of forward contracts and foreign currency options as hedging instruments, and use of matching/natural hedging strategy.

Pper Title:- Industry - with Asset Liability Management in Indian

Bankingspecial reference to Interest RateRisk Management in

ICICI Bank

Author:- Dr. B. Charumathi

Findings:-Assets and Liabilities Management (ALM) is a dynamic process of planning, organizing, coordinating and controlling the assets and liabilities – their mixes, volumes, maturities, yields and costs in order to achieve a specified Net Interest Income (NII). The NII is the difference between interest income and interest expenses and the basic source of banks profitability. The easing of controls on interest rates has led to higher interest rate volatility in India. Hence, there is a need to measure and monitor the interest rate exposure of Indian banks. This paper entitled ―A Study on the Assets and Liabilities Management (ALM) Practices with special reference to Interest Rate Risk Management at ICICI Bank‖ is aimed at measuring the Interest Rate Risk in ICICI Bank by using Gap Analysis Technique. Using publicly available information, this paper

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attempts to assess the interest rate risk carried by the ICICI bank in March 2005, 2006, & 2007. The findings revealed that the bank is exposed to interest rate risk .Index Terms — Interest volatility, risk, Indian banks

Paper Title:- ASSET-LIABILITY MANAGEMENT UNDER

BENCHMARK AND MEAN-VARIANCECRITERIA IN A JUMP

DIFFUSION MARKET

Author :- Yan ZENG(1), Zhongfei LI(2)

Findings:-Assets and Liabilities Management (ALM) is a dynamic process of planning, organizing, coordinating and controlling the assets and liabilities – their mixes, volumes, maturities, yields and costs in order to achieve a specified Net Interest Income (NII). The NII is the difference between interest income and interest expenses and the basic source of banks profitability. The easing of controls on interest rates has led to higher interest rate volatility in India. Hence, there is a need to measure and monitor the interest rate exposure of Indian banks. This paper entitled ―A Study on the Assets and Liabilities Management (ALM) Practices with special reference to Interest Rate Risk Management at ICICI Bank‖ is aimed at measuring the Interest Rate Risk in ICICI Bank by using Gap Analysis Technique. Using publicly available information, this paper attempts to assess the interest rate risk carried by the ICICI bank in March 2005, 2006, & 2007. The findings revealed that the bank is exposed to interest rate risk. Index Terms — Interest volatility, risk , Indian banks

Pepar Title :- Optimal Asset Allocation in Asset Liability

Management

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Findings

:-We study the impact of regulations on the investment decisions of a defined benefits pension plan. We assess the influence of ex ante (preventive) and ex post (punitive) risk constraints on the gains to dynamic, as opposed to myopic, decision making. We find that preventive measures, such as Value-at-Risk constraints, tend to decrease the gains to dynamic investment. In contrast, punitive constraints, such as mandatory additional contributions from the sponsor when the plan becomes underfunded, lead to very large utility gains from solving the dynamic program. We also show that financial reporting rules have real effects on investment behavior. For example, the current requirement to discount liabilities at a rolling average of yields, as opposed to at current yields, induces grossly suboptimal investment decisions.

Paper Title: IMPORTANCE OF ASSET AND LIABILITY

MANAGEMENT IN THE NIGERIA BANKING INDUSTRY (A

CASE STUDY OF EQUITY BANK NIGERIA LIMITED)

Authors

:-

faloye and andrew

Findings

:-This study examines the extent to which Asset and Liability management is crucial to the existence and survival of a bank. Banking is confidence driven and the extent to which this confidence is secured and retained depends on the efficiency with which Bank asset and liabilities are managed to the satisfaction of the various constituencies that the bank serves viz: Depositors, Borrowers, Shareholders, Regulatory Authorities and the Community. The scope of this survey is an in-depth study of the Assets and Liabilities Management in EquityBank of Nigeria Limited in the years before re-structure (1993 to 1995) and after the re-structure (1996 to 1998). The survey will be limited to select Heads of Department and above. The survey would also cover both the surviving members of the Meridien Equity Bank, the restructuring management from Nigerian Intercontinental Merchant Bank Limited and new members of staff after the restructure. It was found out that the crisis of confidence in the financial system and its illiquidity is traced to the macro-economic and political problems of the country. Government's

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unsuccessful attempt to arrest the above through various measures as well as the massive looting of the treasury led to high loan defaults and exacerbated the financial crisis and the resulting mass liquidation of financial Institutions and commercial banks did not properly address the problem of effective Asset and liability management and this triggered off the bank failures already witnessed. It can therefore be concluded that effective asset and liability management is critical factor in a commercial bank. It is of utmost necessity that good asset and liability management policies should be in place in a capitalist society to mobilize available resources (liabilities) and divert them to profitable instruments (assets) to achieve bank viability and growth: Inefficient Asset and Liability Management could result in bank failure.

Paper title :-A Financial assets and liabilities management support

system

Author:- Yung-Hsin Wang, Ta-Hua Kuo

Findings

:-This paper describes the design and implementation of a decision support system (DSS) based on the fund dispatching decision viewpoint from the financial division of a business group. An integrated data warehouse is established and the technique of online analytical processing (OLAP) is applied to analyze daily transaction data of an enterprise resource planning system with determined management goal. We adopt the Business Dimensional Lifecycle approach to accomplish the system design and development. The DSS system developed is to provide latest and timely information of financial asset and liability positions in each company within the case business group so that decision makers can have a clear decision support in fund dispatching. While most related researches on fund dispatching focused especially on efficient banking capital management and few studies were done for general financial department of traditional enterprise let alone for the business group, this study has made a progress in this issue and the resultant system is applicable to the similar business group .the interest rate changing adversely, this in turn protects the owner's equity of the bank. We use seven-day's reacquired interest rate data to estimate the frequency distribution of the fluctuation of the future market rate and solved

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CHAPTER-III



COMPANY PROFILE



Industrial profile

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Company profile& industrial

profile:-A bank is a financial institution that accepts deposits and channels those deposits into lending activities. Banks primarily provide financial services to customers while enriching investors. Government restrictions on financial activities by banks vary over time and location. Banks are important players in financial markets and offer services such as investment funds and loans. In some countries such as Germany, banks have historically owned major stakes in industrial corporations while in other countries such as the United States banks are prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the keiretsu. In France, bancassurance is prevalent, as most banks offer insurance services (and now real estate services) to their clients.

The level of government regulation of the banking industry varies widely, with countries such as Iceland, having relatively light regulation of the banking sector, and countries such as China having a wide variety of regulations but no systematic process that can be followed typical of a communist system.

The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been operating continuously since 1472.

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History

Origin of the word

:-The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Jewish Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth. However, there are traces of banking activity even in ancient times, which indicates that the word 'bank' might not necessarily come from the word 'banco'.

In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words banco and bank are derived. As a moneychanger, the merchant at the bancu did not so much invest money as merely convert the foreign currency into the only legal tender in Rome — that of the Imperial Mint.

The earliest evidence of money-changing activity is depicted on a silver drachm coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350 – 325 BC, presented in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city.

In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and a bank.

Traditional banking

activities:-Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM.

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Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending.

Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account.

Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings to.

Entry regulation

:-Currently in most jurisdictions commercial banks are regulated by government entities and require a special bank licence to operate.

Usually the definition of the business of banking for the purposes of regulation is extended to include acceptance of deposits, even if they are not repayable to the customer's order — although money lending, by itself, is generally not included in the definition.

Unlike most other regulated industries, the regulator is typically also a participant in the market, i.e. a government-owned (central) bank. Central banks also typically have a monopoly on the business of issuing banknotes. However, in some countries this is not the case. In the UK, for example, the Financial Services Authority licences banks, and some commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to those issued by the Bank of England, the UK government's central bank.

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Definition

:-The definition of a bank varies from country to country.

Under English common law, a banker is defined as a person who carries on the business of banking, which is specified as:

 conducting current accounts for his customers

 paying cheques drawn on him, and

 collecting cheques for his customers.

In most English common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments, including cheques, and this Act contains a statutory definition of the term banker : banker includes a body of persons, whether incorporated or not, who carry on the business of banking' (Section 2, Interpretation). Although this definition seems circular, it is actually functional, because it ensures that the legal basis for bank transactions such as cheques do not depend on how the bank is organised or regulated.

The business of banking is in many English common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business. When looking at these definitions it is important to keep in minds that they are defining the business of banking for the purposes of the legislation, and not necessarily in general. In particular, most of the definitions are from legislation that has the purposes of entry regulating and supervising banks rather than regulating the actual business of banking. However, in many cases the statutory definition closely mirrors the common law one. Examples of statutory definitions:

"banking business" means the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to

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customers, and includes such other business as the Authority may prescribe for the purposes of this Act; (Banking Act (Singapore), Section 2, Interpretation).

"Banking business" means the business of either or both of the

following:- receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than [3 months] ... or w ith a period of call or notice of less than that period;

 paying or collecting cheques drawn by or paid in by customers[6]

Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and internet banking, the cheque has lost its primacy in most banking systems as a payment instrument. This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect cheques.

Accounting for bank accounts

:-Bank statements are accounting records produced by banks under the various accounting standards of the world. Under GAAP and IFRS there are two kinds of accounts: debit and credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets and Expenses. This means you credit a credit account to increase its balance, and you debit a debit account to decrease its balance.

This also means you debit your savings account every time you deposit money into it (and the account is normally in deficit), while you credit your credit card account every time you spend money from it (and the account is normally in credit).

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your account, you have a positive (or credit) balance; if you are overdrawn, you have a negative (or deficit) balance.

The reason for this is that the bank, and not you, has produced the bank statement. Your savings might be your assets, but the bank's liability, so they are credit accounts (which should have a positive balance). Conversely, your loans are your liabilities but the bank's assets, so they are debit accounts (which should also have a positive balance).

Where bank transactions, balances, credits and debits are discussed below, they are done so from the viewpoint of the account holder — which is traditionally what most people are used to seeing.

Economic functions

:- Issue of money, in the form of banknotes and current accounts subject to cheque or payment at the customer's order. These claims on banks can act as money because they are negotiable and/or repayable on demand, and hence valued at par. They are effectively transferable by mere delivery, in the case of banknotes, or by drawing a cheque that the payee may bank or cash.

 netting and settlement of payments – banks act as both collection and paying agents for customers, participating in interbank clearing and settlement systems to collect, present, be presented with, and pay payment instruments. This enables banks to economise on reserves held for settlement of payments, since inward and outward payments offset each other. It also enables the offsetting of payment flows between geographical areas, reducing the cost of settlement between them.

 credit intermediation – banks borrow and lend back-to-back on their own account as middle men.

 credit quality improvement – banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes from diversification of the bank's assets and capital which provides a buffer to absorb losses without defaulting on its obligations. However, banknotes and deposits are generally unsecured; if the bank gets into difficulty and pledges assets as security, to rise the funding it

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needs to continue to operate, this puts the note holders and depositors in an economically subordinated position.

 maturity transformation – banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets).

Law of banking

Banking law is based on a contractual analysis of the relationship between the bank (defined above) and the customer — defined as any entity for which the bank agrees to conduct an account.

The law implies rights and obligations into this relationship as follows:

 The bank account balance is the financial position between the bank and the customer: when the account is in credit, the bank owes the balance to the customer; when the account is overdrawn, the customer owes the balance to the bank.

 The bank agrees to pay the customer's cheques up to the amount standing to the credit of the customer's account, plus any agreed overdraft limit.

 The bank may not pay from the customer's account without a mandate from the customer, e.g. a cheque drawn by the customer.

 The bank agrees to promptly collect the cheques deposited to the customer's account as the customer's agent, and to credit the proceeds to the customer's account.

 The bank has a right to combine the customer's accounts, since each account is just an aspect of the same credit relationship.

 The bank has a lien on cheques deposited to the customer's account, to the extent that the customer is indebted to the bank.

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 The bank must not disclose details of transactions through the customer's account — unless the customer consents, there is a public duty to disclose, the bank's interests require it, or the law demands it.

 The bank must not close a customer's account without reasonable notice, since cheques are outstanding in the ordinary course of business for several days.

These implied contractual terms may be modified by express agreement between the customer and the bank. The statutes and regulations in force within a particular jurisdiction may also modify the above terms and/or create new rights, obligations or limitations relevant to the bank-customer relationship.

Some types of financial institution, such as building societies and credit unions, may be partly or wholly exempt from bank licence requirements, and therefore regulated under separate rules.

The requirements for the issue of a bank licence vary between jurisdictions but typically include:

 Minimum capital

 Minimum capital ratio

 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or senior officers

 Approval of the bank's business plan as being sufficiently prudent and plausible.

Types of banks

:-Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to high net worth individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations.

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Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis.

Types of retail banks

:- Commercial bank: the term used for a normal bank to distinguish it from an investment bank. After the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.

 Community Banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners.

 Community development banks: regulated banks that provide financial services and credit to under-served markets or populations.

 Postal savings banks: savings banks associated with national postal systems.  Private banks: banks that manage the assets of high net worth individuals.

 Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.

 Savings bank: in Europe, savings banks take their roots in the 19th or sometimes even 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative; in others, socially committed individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from

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and regional outreach — and by their socially responsible approach to business and society.

 Building societies and Landesbanks: institutions that conduct retail banking.

 Ethical banks: banks that prioritize the transparency of all operations and make only what they consider to be socially-responsible investments.

 Islamic banks: Banks that transact according to Islamic principles.

Types of investment banks

:- Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts, make markets, and advise corporations on capital market activities such as mergers and acquisitions.

 Merchant banks were traditionally banks which engaged in trade finance. The modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike venture capital firms, they tend not to invest in new companies.

Both combined

:-Universal banks, more commonly known as financial services companies, engage in several of these activities. These big banks are very diversified groups that, among other services, also distribute insurance — hence the term bancassurance, a portmanteau word combining "banque or bank" and "assurance", signifying that both banking and insurance are provided by the same corporate entity.

Other types of banks

Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around several well-established principles based on Islamic canons. All banking activities must avoid interest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup) and fees on the financing facilities that it extends to customers.

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Industrial profile

The Housing Development Finance Corporation Limited

(HDFC):-The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

OVERVIEW OF THE INDUSTRY

HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

As on 31st December, 2009 the authorized share capital of the Bank is Rs. 550 crore. The paid-up capital as on said date is Rs. 455,23,65,640/- (45,52,36,564 equity shares of Rs. 10/-each). The HDFC Group holds 23.87 % of the Bank's equity and about 16.94 % of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). 27.46 % of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has about 4,58,683 shareholders.

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New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002.

Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was Deputy Governor of the RBI

MANAGEMENT

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years, and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.The Bank's Board of Directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing HDFC are also on the Board. Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry, the bank believes that its people are a significant competitive strength.

BOARD OF DIRECTORS

 Mr. Jagdish Capoor, Chairman

 Mr. Keki Mistry

 Mrs. Renu Karnad

 Mr. Arvind Pande

 Mr. Ashim Samanta

 Mr. Chander Mohan Vasudev

 Mr. Gautam Divan

 Dr. Pandit Palande

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 Mr. Harish Engineer, Executive Director

 Mr. Paresh Sukthankar, Executive Director

 Mr. Vineet Jain (upto 27.12.2008)

REGISTERED

OFFICE:-HDFC Bank House, Senapati Bapat Marg, Lower Parel,

Website: www.hdfcbank.com

HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments

Wholesale Banking Services

:-The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian corporate to small & mid-sized corporates and agri-based businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of structured solutions, which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. Based on its superior product delivery / service levels and strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading Indian corporates including multinationals, companies from the domestic business houses and prime public sector companies. It is recognised as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks.

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Retail Banking Services

:-The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, NetBanking and Mobile Banking.

The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Participant (DP) services for retail customers, providing customers the facility to hold their investments in electronic form.

HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Mastercard Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2009, the bank had a total card base (debit and credit cards) of over 13 million. The Bank is also one of the leading players in the ―merchant acquiring‖ business with over 70,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc.

Treasury:-Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the liberalisation of the financial markets in India, corporates need more sophisticated risk management information, advice and product structures. These and fine pricing on various

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treasury products are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities.

Awards and Achievements - Banking

Services:-2011

Outlook Money Best Bank Award 2011

- Best Bank - Runner Up

Best Commercial Vehicle Financier

- Driving Positive Change

Businessworld Best Bank award

- Best Bank

BCI Continuity & Resilience Award

- Most Effective Recovery of the Year

Financial Express Best Bank Survey 2010-11

- Best in Strength and Soundness - 2nd Best in the Private Sector

CNBC TV18's Best Bank & Financial Institution Awards

- Best Bank

- Mr. Aditya Puri, Outstanding Finance Professional

Dun & Bradstreet Banking Awards 2011

Best Private Sector Bank - SME Financing

ISACA 2011 award for IT Governance

Best practices in IT Governance and IT Security

IBA Productivity Excellence Awards 2011

New Channel Adopter (Private Sector)

DSCI (Data

Security Council of India) Excellence Awards 2011

Security in Bank

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FINANCE ASIA Country Awards 2011: India

- BEST BANK

- BEST CASH MANAGEMENT BANK - BEST TRADE FINANCE BANK

Asian Banker Strongest Bank in Asia Pacific BloombergUTV's Financial Leadership Awards 2011 Best Bank IBA Banking Technology Awards 2010 Winner

-1) Technology Bank of the Year 2) Best Online Bank

3) Best Customer Initiative

4) Best Use of Business Intelligence 5) Best Risk Management System Runners Up

-Best Financial Inclusion IDC FIIA Awards

2011

Excellence in Customer Experience

2010

Global Finance Award

Best Trade Finance Provider in India for 2010

2 Banking Technology Awards 2009

1) Best Risk Management Initiative and 2) Best Use of Business Intelligence. SPJIMR Marketing Impact Awards (SMIA) 2010 2nd Prize Business Today Best Employer Survey

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Corporate

Governance:-The bank was among the first four companies, which subjected itself to a Corporate The bank was among the first four companies, which subjected itself to a Corporate Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating Information Services of India Limited (CRISIL). The rating provides an independent assessment Information Services of India Limited (CRISIL). The rating provides an independent assessment of an entity's current performance and an expectation on its "balanced value creation and of an entity's current performance and an expectation on its "balanced value creation and corporate governance practices" in future. The bank has been assigned a 'CRISIL GVC Level 1' corporate governance practices" in future. The bank has been assigned a 'CRISIL GVC Level 1' rating, which indicates that the bank's capability with respect to wealth creation for all its rating, which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest.We are aware stakeholders while adopting sound corporate governance practices is the highest.We are aware that all these awards are mere milestones in the continuing, never-ending journey of providing that all these awards are mere milestones in the continuing, never-ending journey of providing excellent service to our customers. We are confident, however, that with your feedback and excellent service to our customers. We are confident, however, that with your feedback and support, we will be able to maintain and improve our services.

support, we will be able to maintain and improve our services.

Technology:-HDFC Bank operates in a highly automated environment in terms of information HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the bank's branches have online connectivity, which technology and communication systems. All the bank's branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines also provided to retail customers through the branch network and Automated Teller Machines (ATMs).

(ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology The Bank has made substantial efforts and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. The Bank's business available internationally, to build the infrastructure for a world class bank. The Bank's business is supported by scalable and robust systems which ensure that our clients always get the finest is supported by scalable and robust systems which ensure that our clients always get the finest services we offer. The Bank has prioritised its engagement in technology and the internet as one services we offer. The Bank has prioritised its engagement in technology and the internet as one of its key goals and has already made significant progress in web-enabling its core businesses. In of its key goals and has already made significant progress in web-enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share.

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Mission and Business

Strategy:-Our mission is to be "a World Class Indian Bank", benchmarking ourselves against Our mission is to be "a World Class Indian Bank", benchmarking ourselves against international standards and best practices in terms of product offerings, technology, service international standards and best practices in terms of product offerings, technology, service levels, risk management and audit & compliance. The objective is to build sound customer levels, risk management and audit & compliance. The objective is to build sound customer franchises across distinct businesses so as to be a preferred provider of banking services for franchises across distinct businesses so as to be a preferred provider of banking services for target retail and wholesale customer segments, and to achieve a healthy growth in profitability, target retail and wholesale customer segments, and to achieve a healthy growth in profitability, consistent with the Bank's risk appetite. We are committed to do this while ensuring the highest consistent with the Bank's risk appetite. We are committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory levels of ethical standards, professional integrity, corporate governance and regulatory compliance.

compliance.

Our business strategy emphasizes the following : Our business strategy emphasizes the following :



 Increase our market share in India’s expanding banking and finaIncrease our market share in India’s expanding banking and financial services industry byncial services industry by following a disciplined growth strategy focusing on quality and not on quantity and delivering following a disciplined growth strategy focusing on quality and not on quantity and delivering high quality customer service.

high quality customer service.



 Leverage our technology platform and open scaleable systems to deliver more products toLeverage our technology platform and open scaleable systems to deliver more products to more customers and to control operat

more customers and to control operating costs.ing costs.



 Maintain our current high standards for asset quality through disciplined credit riskMaintain our current high standards for asset quality through disciplined credit risk management.

management.



 Develop innovative products and services that attract our targeted customers and addressDevelop innovative products and services that attract our targeted customers and address inefficiencies in the Indian financial sector.

inefficiencies in the Indian financial sector.



 Continue to develop products and services that reduce Continue to develop products and services that reduce our cost of funds.our cost of funds.



 Focus on high earnings growth with low volatility.Focus on high earnings growth with low volatility.

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of 1,725 branches spread in 771 cities across India. All branches are linked on an online real-time 1,725 branches spread in 771 cities across India. All branches are linked on an online real-time

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basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank's basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and expansion plans take into account the need to have a presence in all major industrial and commercial centres where its corporate customers are located as well as the need to build a commercial centres where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE have a strong and active member base.

have a strong and active member base.

The Bank also has 3,898 networked ATMs across these cities. Moreover, HDFC Bank's The Bank also has 3,898 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.

Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.

AIMS:



 Continuous effort to improving the services.Continuous effort to improving the services.



 Evaluating individual skill trough training and motivations.Evaluating individual skill trough training and motivations.



 Total involvement through participant’s management activities.Total involvement through participant’s management activities.



 Creating healthy and safe environment.Creating healthy and safe environment.



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CHAPTER-IV

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ASSET LIABILITY MANAGEMENT (ALM)

SYSTEM:-Asset-Liability Management (ALM) can be termed as a risk management technique designed to earn an adequate return while maintaining a comfortable surplus of assets beyond liabilities. It takes into consideration interest rates, earning power, and degree of willingness to take on debt and hence is also known as Surplus Management.

But in the last decade the meaning of ALM has evolved. It is now used in many different ways under different contexts. ALM, which was actually pioneered by financial institutions and banks, are now widely being used in industries too. The Society of Actuaries Task Force on ALM Principles, Canada, offers the following definition for ALM: "Asset Liability Management is the on-going process of formulating, implementing, monitoring, and revising strategies related to assets and liabilities in an attempt to achieve financial objectives for a given set of risk tolerances and constraints."

Basis of Asset-Liability Management

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policies or annuities. They would then invest the proceeds from these liabilities in assets such as loans, bonds or real estate. All these assets and liabilities were held at book value. Doing so disguised possible risks arising from how the assets and liabilities were structured.

Consider a bank that borrows 1 Crore (100 Lakhs) at 6 % for a year and lends the same money at 7 % to a highly rated borrower for 5 years. The net transaction appears profitable-the bank is earning a 100 basis point spread - but it entails considerable risk. At the end of a year, the bank will have to find new financing for the loan, which will have 4 more years before it matures. If interest rates have risen, the bank may have to pay a higher rate of interest on the new financing than the fixed 7 % it is earning on its loan.

Suppose, at the end of a year, an applicable 4-year interest rate is 8 %. The bank is in serious trouble. It is going to earn 7 % on its loan but would have to pay 8 % on its financing. Accrual accounting does not recognize this problem. Based upon accrual accounting, the bank would earn Rs 100,000 in the first year although in the preceding years it is going to incur a loss.

The problem in this example was caused by a mismatch between assets and liabilities. Prior to the 1970's, such mismatches tended not to be a significant problem. Interest rates in developed countries experienced only modest fluctuations, so losses due to asset-liability mismatches were small or trivial. Many firms intentionally mismatched their balance sheets and as yield curves were generally upward sloping, banks could earn a spread by borrowing short and lending long.

Things started to change in the 1970s, which ushered in a period of volatile interest rates that continued till the early 1980s. US regulations which had capped the interest rates so that banks could pay depositors, was abandoned which led to a migration of dollar deposit overseas. Managers of many firms, who were accustomed to thinking in terms of accrual accounting, were slow to recognize this emerging risk. Some firms suffered staggering losses. Because the firms used accrual accounting, it resulted in more of crippled balance sheets than bankruptcies. Firms had no options but to accrue the losses over a subsequent period of 5 to 10 years.

One example, which drew attention, was that of US mutual life insurance company "The Equitable." During the early 1980s, as the USD yield curve was inverted with short-term interest