Budgeting Like an ALCO: Rethinking the 2027 Budget

Budgeting season has arrived for banks and credit unions. DCG's Ryan Gilles offers new thinking on how institutions can better perform across a range of possible outcomes.

With the final quarter of the calendar year upon us, one of the biggest tasks for bank and credit union finance teams becomes developing the budget for the upcoming year.

Given the uncertainty surrounding the path ahead, coming up with one set of assumptions to feel confident in can start to feel like an impossible exercise.

This got me thinking: no ALCO committee that DCG works with would feel comfortable evaluating its interest rate risk position if the ALCO report relied on only one rate scenario. So why do financial institutions still build budgets that way?

If ALCO committees rely on multiple rate scenarios, varying cash flows, and different loan and deposit pricing assumptions to understand how the balance sheet may perform across a range of outcomes, perhaps it’s time to start treating the budget more like an ALCO model.

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Budgeting Like an ALCO: Rethinking the 2027 Budget

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