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 Long-Term Liabilities

    A balance sheet item that includes obligations which are not ...
  4. Long-Term Liabilities

    In accounting, a section of the balance sheet that lists obligations ...
  5. Other Current Liabilities

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

    A type of liability that does not exceed the amount invested ...
Related Articles
  1. Investing

    Understanding Total Liabilities

    Total liabilities are the combined debts an individual or company owes.
  2. 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.
  3. Investing

    Examples Of Asset/Liability Management

    In its simplest form, asset/liability management entails managing assets and cash inflows to satisfy various obligations; however, it's rarely that simple.
  4. 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.
  5. 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.
  6. Small Business

    Understanding Limited Liability

    Limited liability is a legal concept that protects equity owners from personal losses due to their ownership interest in the company.
  7. Investing

    Explaining Accrued Liability

    Accrued liability is an accounting term for an expense a business has incurred but has yet to pay.
  8. Investing

    Explaining Noncurrent Liabilities

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

    How to Analyze a Company's Financial Position

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

    Figuring Out How To Cover Your Liability Bases

    Whenever we talk about the asset-liability approach to portfolio management (ALM), the concepts of immunization and cash flow matching come into play.
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. What kinds of liabilities appear on the balance sheet?

    Learn what current and non-current liabilities are, the difference between the two, and examples of liabilities that a company ... Read Answer >>
  4. What types of future events are taking into account for contingent liability?

    Understand the concept of contingent liabilities, and learn about some of the most common types of contingent liabilities ... Read Answer >>
  5. 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 >>
  6. What is the difference between legal liability and public liability?

    Discover the differences between a general legal liability, a specific public liability and a professional indemnity in the ... Read Answer >>
Hot Definitions
  1. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  2. Money Market

    A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. ...
  3. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  4. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  5. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  6. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
Trading Center