What is 'Liability Management'

Liability management is the 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. Total Liabilities

    The aggregate of all debts an individual or company is liable ...
  2. Liability

    Liabilities are defined as a company's legal debts or obligations ...
  3. Other Current Liabilities

    A balance sheet entry used by companies to group together current ...
  4. Limited Liability

    A type of liability that does not exceed the amount invested ...
  5. Current Liabilities

    A company's debts or obligations that are due within one year. ...
  6. Adjusted Liabilities

    The liabilities of an insurance company that differ from the ...
Related Articles
  1. Investing

    Reviewing Liabilities On The Balance Sheet

    As an experienced or new analyst, liabilities tell a deep story of how a company finances, plans and accounts for money it will need to pay at a future date.
  2. Taxes

    What is a Tax Liability?

    Tax liability is the amount of money a person or entity owes to the government as the result of a taxable event.
  3. Personal Finance

    How To Improve Net Worth By Decreasing Liabilities

    Here's an analysis of how to adjust liabilities and assets to improve net worth.
  4. Investing

    Current Liabilities

    Current Liabilities are company debts due within one year or one operating cycle, whichever is greater. An operating cycle is the time it takes a company to purchase inventory and convert it ...
  5. Investing

    Explaining Noncurrent Liabilities

    Noncurrent liabilities are financial obligations a company owes a year or more into the future.
  6. Investing

    How To Analyze A Company's Financial Position

    Find out how to calculate important ratios and compare them to market value.
  7. Investing

    Watch A Bank's Liabilities

    The Federal Reserve will eventually raise interest rates, raising the cost of funds for many banks.
  8. Investing

    What is a Bank?

    A bank is a financial institution licensed to receive deposits or issue new securities to the public.
  9. Insurance

    An Advisor's Guide to Prof. Liability Insurance

    A guide to what financial advisors need to know about professional liability insurance.
RELATED FAQS
  1. What are some examples of current liabilities?

    Examine some common examples of current liabilities a company may owe within a year or less in order to accurately assess ... Read Answer >>
  2. How might a company's contingent liabilities affect its share price?

    Discover what contingent liabilities are, and how and to what extent such liabilities may have an impact on a company's share ... Read Answer >>
  3. Do banks have working capital?

    Learn the reasons why banks do not have working capital due to the lack of typical current assets and liabilities accounts, ... Read Answer >>
  4. What are the official FASB guidelines regarding contingent liabilities

    Learn how the Financial Accounting Standards Board, or FASB, treats the recognition, estimation and disclosure of contingent ... Read Answer >>
  5. On which financial statements does a company report its long-term debt?

    Discover which financial statements are used to report a company’s long-term debt, as well as how a company uses debt to ... Read Answer >>
  6. Do tax liabilities appear in the financial statements?

    Find out how taxes are shown on the balance sheet, the income statement and the cash flow statement, and why taxes are an ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  3. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  4. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  5. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  6. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
Trading Center