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What KPIs Should ALM Analysts Monitor to Steer the Balance Sheet?

Let’s be honest—ALM isn’t just about compliance. It’s about steering the bank’s balance sheet through uncertainty while keeping profitability, stability, and regulatory requirements in check. And that’s no small task.

So which KPIs actually help you steer, not just report?

Here’s a practical, no-fluff list of metrics that give ALM analysts the visibility and control they need.

1. Net Interest Margin (NIM)

  • Why it matters: Measures profitability from core banking activities.
  • Focus: Track how changes in rates, funding mix, or product pricing affect NIM.
  • Use: Helps steer pricing strategies and interest rate positioning.

2. Liquidity Coverage Ratio (LCR)

  • Why it matters: Regulatory requirement to hold enough high-quality liquid assets (HQLA).
  • Focus: Daily/weekly monitoring, stress testing inflows/outflows.
  • Use: Ensures short-term liquidity is always covered under stress.

3. Net Stable Funding Ratio (NSFR)

  • Why it matters: Ensures stable funding over a one-year horizon.
  • Focus: Funding profile versus asset maturities.
  • Use: Steers long-term funding decisions.

4. Interest Rate Risk in the Banking Book (IRRBB)

  • Metrics:
    • Earnings at Risk (EaR) – impact on net interest income.
    • Economic Value of Equity (EVE) – impact on the bank’s value.
  • Use: Supports hedging decisions, product design, and balance sheet strategy.

5. Gap Analysis (Time Buckets)

  • Why it matters: Identifies mismatches in asset and liability maturities.
  • Focus: Refinancing risk, reinvestment risk.
  • Use: Helps with tactical steering of funding and investments.

6. Cost of Funds vs. Yield on Assets

  • Why it matters: Clear picture of margin drivers.
  • Focus: Monitor spreads and identify underperforming portfolios.
  • Use: Optimise funding mix and asset allocation.

7. Loan-to-Deposit Ratio (LDR)

  • Why it matters: Indicates funding reliance and liquidity strength.
  • Use: Monitor balance between lending activity and funding sources.

8. Behavioural Modelling KPIs

  • Why it matters: Some liabilities (like non-maturing deposits) behave differently from contractual terms.
  • Focus: Decay rates, early redemption patterns.
  • Use: Improves forecasting and ALM model accuracy.

9. Liquidity Stress Test Results

  • Why it matters: Assesses resilience to market shocks.
  • Use: Guides contingency planning and buffers.

10. Capital Adequacy Ratio (CAR)

Use: Informs strategic planning, including dividend policy and risk appetite.

Why it matters: Shows how well the bank can absorb losses.

More than numbers—insight that drives action

KPIs are only useful if they trigger meaningful questions:

  • Are we positioned for a rate hike or caught offside?
  • Is the margin squeeze coming from funding or mispricing?
  • Are our assumptions still valid, or are we flying blind?

This is where an integrated ALM platform makes the difference. At MORS, we give ALM teams the tools to:

  • Model scenarios fast
  • Visualise the full balance sheet in real time
  • Drill down from KPI to root cause—without pulling data from 5 places