Liability Management

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. Other Long-Term Liabilities

    A balance sheet item that includes obligations which are not ...
  3. Liability

    A company's legal debts or obligations that arise during the ...
  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. Entrepreneurship & Small Business

    Understanding Total Liabilities

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

    What's a Liability?

    A liability is a debt. It is an obligation that arises during the course of business and represents a third-party claim on the company's assets. A liability can arise in a number of different ...
  3. Managing Wealth

    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. Investing

    Explaining Long-Term Liability

    A long-term liability is an obligation a company owes a year or more into the future.
  5. 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 ...
  6. Personal Finance

    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.
  7. Investing

    Understanding Limited Liability

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

    Explaining Accrued Liability

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

    Explaining Noncurrent Liabilities

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

    How To Analyze A Company's Financial Position

    Find out how to calculate important ratios and compare them to market value.
RELATED FAQS
  1. What is the difference between an expense and a liability?

    Learn what liabilities and expenses are, which financial statements they are listed on, and the differences between liabilities ... Read Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  3. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  4. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  5. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  6. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
Trading Center