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. Long-Term Liabilities

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

    A balance sheet entry used by companies to group together current ...
  5. Current Liabilities

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

    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.
  3. 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.
  4. 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.
  5. 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.
  6. Investing

    Explaining Accrued Liability

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

    Explaining Noncurrent Liabilities

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

    How to Analyze a Company's Financial Position

    Find out how to calculate important ratios and compare them to market value.
  9. 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. 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 >>
  2. 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 >>
  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 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 >>
  5. 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 >>
Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Blue Chip

    A blue chip is a nationally recognized, well-established, and financially sound company.
  3. Payback Period

    The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
  4. Collateral Value

    The estimated fair market value of an asset that is being used as loan collateral. Collateral value is determined by appraisal ...
  5. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  6. Current Account

    The difference between a nation’s savings and its investment. The current account is defined as the sum of goods and services ...
Trading Center