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A linear programming model for bank balance sheet management

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  • Güven, S.
  • Persentili, E.

Abstract

Bank balance-sheet management which involves the determination of the size and composition of a bank's assets and liabilities over a multiperiod planning horizon is one of the most prominent issues in bank strategic planning. Not only management policy choices, but legal restrictions and minimum safety requirements, dictated by the economic and political environment operated in, mean a balance has to be struck between the conflicting objectives of profitability, liquidity and risk. Bank balance-sheet management is further complicated by the fact that decisions made at any point in time affect profits, liquidity and risk, not only at the time they are made, but in the periods that follow. This paper discusses a multiperiod linear programming model constructed for a commercial bank in Turkey, that takes into consideration this systematic relationship in the legal, financial and institutional setup of Turkey over the period 1987-1990. Sensitivity analysis results demonstrate the relevance of the model for informed policy choice, and the use of the model as a planning tool.

Suggested Citation

  • Güven, S. & Persentili, E., 1997. "A linear programming model for bank balance sheet management," Omega, Elsevier, vol. 25(4), pages 449-459, August.
    • Handle: RePEc:eee:jomega:v:25:y:1997:i:4:p:449-459
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    References listed on IDEAS

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    1. M. I. Kusy & W. T. Ziemba, 1986. "A Bank Asset and Liability Management Model," Operations Research, INFORMS, vol. 34(3), pages 356-376, June.
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    3. Kalman J. Cohen & Frederick S. Hammer, 1967. "Linear Programming And Optimal Bank Asset Management Decisions," Journal of Finance, American Finance Association, vol. 22(2), pages 147-165, May.
    4. Korhonen, Antti, 1987. "A dynamic bank portfolio planning model with multiple scenarios, multiple goals and changing priorities," European Journal of Operational Research, Elsevier, vol. 30(1), pages 13-23, June.
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    2. Yüksel Akay Ünvan & Cansu Ergenç, 2022. "Financial Performance Analysis with the Fuzzy COPRAS and Entropy-COPRAS Approaches," Computational Economics, Springer;Society for Computational Economics, vol. 59(4), pages 1577-1605, April.

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