UNCTAD Virtual Institute for Trade and Development
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Sovereign Asset and Liability Management: An E-Learning Training Course
I. Institutional Setting
II.Asset and Liability Management Office
III.Debt Management Office
IV. Potential Conflicts of Interest Between the Central Government and Central Bank


As SALM is normally fragmented and spread out over several agencies, the need for interagency cooperation is paramount. SALM will also require a degree of mutual engagement between the CB and the central government agency carrying out the duties of SALM. Ideally, a specific asset and liability management office will be created which will give institutional credibility to the office and signal the importance by sovereigns of the value being placed on management of both assets and liabilities. For SALM within the DMO, operational objectives and roles must be identified and clearly defined for the front, middle, and back offices in order to avoid potential conflict and territorial battles that may be inherent in each office’s role. For example, the middle office’s need to manage risk may conflict with the front office’s need for innovation and creativity which could result in tension.

The success of implementing SALM will in large part be determined not just by the quantitative ability of a sovereign to manage risk and carry out its policy objectives, but by the institutional conditions that drive its implementation. Institutions will need to be efficient, transparent, and accountable in order to achieve the policy objectives they wish to achieve through the SALM framework. Additionally, a culture of communication and cooperation will need to exist as SALM will require the interaction of more than one agency or ministry and almost always the support of the CB. An effective SALM framework will have to strike the optimal balance between the benefits of fully integrated risk management and the need to maintain the autonomy of the CB in conducting monetary policy. Clearly, coordinating foreign reserves and debt management will be challenging.


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