Liability Management

AAA

DEFINITION of 'Liability Management'

Use and management of liabilities, such as customer deposits, by a bank in order to facilitate lending and allow for balanced growth. Management of money accepted from depositors as well as funds secured from other institutions constitute liability management. It also involves hedging against changes in interest rates and controlling the gap between the maturities of assets and liabilities.

BREAKING DOWN 'Liability Management'

Banks began to actively manage liabilities in the 1960s with the issuance of negotiable CDs. These could be sold in the secondary market, prior to maturity in order to raise additional capital in the money market. Liability management constitutes an important part of a bank's bottom line.

RELATED TERMS
  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Liability Ledger

    The central file that contains a comprehensive list of all of ...
  3. Liability

    A company's legal debts or obligations that arise during the ...
  4. Operating Cost

    Expenses associated with the maintenance and administration of ...
  5. Trade Credit

    An agreement where a customer can purchase goods on account (without ...
  6. Normal Profit

    An economic condition occurring when the difference between a ...
Related Articles
  1. Investing Basics

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  2. Personal Finance

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  3. Forex Education

    Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  4. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  5. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  6. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  7. Economics

    Explaining the CAMELS Rating System

    Regulators use the CAMELS rating system to evaluate a bank’s level of risk and overall condition.
  8. Economics

    Explaining Accounting Conservatism

    Accounting conservatism is a principal that requires accounting rules be applied with high degrees of verification.
  9. Term

    What are Non-GAAP Earnings?

    Non-GAAP earnings are a company’s earnings that are not reported according to Generally Accepted Accounting Principles.
  10. Investing

    Blockchain Technology To Revolutionize Traditional Banking

    Blockchain technology is being taken seriously by the financial sector as it may prove to be a great disrupter to the traditional banking industry.
RELATED FAQS
  1. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  2. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  3. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  4. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  2. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  4. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  5. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  6. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!