Asset and liability management in banking and the possible effects of disinflation process on asset and liability management

Asset and liability management expresses the process of banks' sources and uses of funds. Banks managed their assets and liabilities separately, dependent on the developments in economic conditions of the country until 1980's. After 1980's the banks have started to take up the assets and liabilities together dependent on the developments in financial markets. The current economic conditions of the country and the goverment policies carried out are two of the important determiners in the bank's asset and liability management process. The stucture and management of assets and liabilities of Turkish banks which lived a structural transformation in 1980's has took their from with the effects of macroeconomic developments and ownership stucture of the banks. High inflation rates and goverments borrowing policy has effected the bank's structure and maturity of sources and uses of funds. Regarding to this effecting process, besides the increase of liabilities in foreign currencies in fund sources of the banks, the credits in uses of fund reduced contiuously and the investment securities have protected its importance. In the lower inflation rates, interest incomes may increase more than interest costs with the countributions of the banks which has a longer average maturity of uses of funds then the sources of funds in the process of transformation from higher inflation rates to lower inflation rates. In this process, the linkage between the banks and real sector will be re-established and exogenously, economic and politic stabilization, arrangements such as deposit insuarence adn rate of reserve, endogenously, factors such as credit policies, capital adeuaty, risk management performances and activity policies of the bank, will be effective.