Liability-driven management, or liability management, refers to a comprehensive fund management method in which commercial bank managers make simultaneous decisions on the type, quantity, total amount of assets and liabilities and their combinations held by commercial banks.

Liability management creates new ways to maintain bank liquidity.

Debt management theory.

Liability management theory emerged in the 1960s. The core idea of ??this theory is to shift the focus of commercial bank management from assets to liabilities, and advocates borrowing funds to maintain bank liquidity, thereby increasing asset business and bank income.

The three stages of liability management: the first stage is the overall management of assets and liabilities; the second stage is the specific management of each item of assets and liabilities to obtain the best combination of each item; the third stage is to achieve profit targets.

management, overhead control, liquidity management, capital management and tax management.

Methods of liability management (1) Liability management of reserve positions Reserve position liability management uses borrowed funds to meet short-term liquidity needs and replenish primary reserves to meet deposit withdrawals and increased loan needs.

This method can allow commercial banks to have a higher proportion of income assets and increase expected income.

However, since the cost of borrowing funds is difficult to determine, borrowing funds is difficult and involves certain risks.

(2) Comprehensive liability management Comprehensive liability management is also called pure liability management, which means that commercial banks use borrowed funds to continuously expand the scale of assets and liabilities.

This method is based on the premise that borrowed funds have greater supply elasticity, the market must have enough participants and sufficient funds, and the activities of a single bank will not affect the level of market interest rates.

Once sufficient funds are not available or the central bank adopts tightening monetary policy, the liability management structure of some small banks may collapse.