• Bank treasurers face rising complexity from regulation, rates and fintech disruption
• Digital assets and euro-denominated stablecoins create new balance-sheet challenges
• Liquidity failures in 2023 show concentration risk remains a critical threat
• AI and agentic systems could transform ALM modelling and strategic decisions
• Treasury must balance innovation with conservative funding and strong governance
• ALCO frameworks remain essential as ALM becomes more predictive and adaptive

Bank treasury operations have not seen a calm operating environment for many years, and according to Moorad Choudhry, founder of Bank Treasury Risk Management (BTRM), writing for Bloomberg, the pressures facing asset-liability management teams are only intensifying. 

He argues that today’s banks must navigate a volatile interest-rate cycle, rapid fintech innovation and a complex regulatory agenda while still delivering an optimised balance sheet for all stakeholders.

Choudhry notes that post-crisis Basel reforms remain incomplete across several jurisdictions, raising the prospect of yet another regulatory iteration by the time the framework is fully implemented. 

At the same time, he highlights the arrival of digital assets, particularly stablecoins, as an emerging balance-sheet issue that banks need to address sooner rather than later. 

The recent decision by nine eurozone banks to launch a euro-denominated stablecoin underscores how quickly the landscape is shifting, even as regulators have yet to clarify how such instruments should be treated within ALM frameworks.

Liquidity management remains a perennial concern. Choudhry points to the failures of Silicon Valley Bank and First Republic Bank in 2023 as reminders that poor liquidity risk practices can still topple institutions. 

Regulators later described these events as textbook examples of ‘Pillar 2 liquidity’ failures caused by extreme balance-sheet concentration by customer type, product type and contractual tenor. 

With no way to predict the next stress scenario, he argues that banks must take a conservative stance on funding structures and keep risk appetite low in this area.

A deeper structural shift may also be approaching. Choudhry warns that if stablecoins evolve into central bank digital currencies, traditional deposits may migrate to central bank balance sheets, reshaping the liability side of commercial banking entirely. 

This possibility raises profound strategic questions for treasurers planning long-term funding models.

The rise of agentic AI represents another major turning point. 

Choudhry notes that AI is already embedded in fraud detection, onboarding and customer processes, but its real impact will come when Treasury and ALM teams begin to use autonomous systems capable of perceiving, reasoning and acting in pursuit of defined goals. 

He believes the technology could transform operating models, delivering real-time balance-sheet reporting and instant stress testing that allow ALCOs to make faster, more informed decisions.

Beyond faster workflows, Choudhry argues that AI could overhaul ALM analytics by identifying complex, non-linear relationships in market and macroeconomic data that traditional regression methods cannot capture. 

In time, this may enable continuous balance-sheet optimisation and predictive scenario modelling, shifting ALM from a periodic reporting function to an adaptive and forward-looking discipline.

Yet he stresses that innovation must be paired with governance. With risks ranging from interest-rate exposure to Pillar 2 liquidity, treasury teams must maintain a strong ALCO structure and a disciplined risk culture. 

For Choudhry, these principles remain the foundation of resilience at a time when geopolitical tension and market uncertainty make operational consistency more important than ever.