each of the four types of transaction listed above.     EXHIBIT 13.2 Banking Balance Sheet   Assets Liabilities   Cash Short-term debt Loans Deposits Financial assets Financial assets Fixed assets Long-term debt Equity capital     Off-balance sheet Off-balance sheet (contingencies received) (contingencies paid)     The Banking Book Traditionally ALM has been concerned with the banking book. The con- ventional techniques of ALM were developed for application to a banks banking book-that is, the lending and deposit-taking transactions. The core banking activity will generate either an excess of funds, when the receipt of deposits outweighs the volume of lending the bank has under- taken, or a shortage of funds, when the reverse occurs. This mismatch is balanced via financial transactions in the wholesale market. The banking book generates both interest-rate and liquidity risks, which are then mon- itored and managed by the ALM desk. Interest-rate risk is the risk that the bank suffers losses due to adverse movements in market interest rates. Liquidity risk is the risk that the bank cannot generate sufficient funds when required; the most extreme version of this is when there is a "run" on the bank, and the bank cannot raise the funds required when deposi- tors withdraw their cash. Note that the asset side of the banking book, which is the loan port- folio, also generates credit risk. The ALM desk will be concerned with risk management that focuses on the quantitative management of the liquidity and interest-rate risks inherent in a banking book. The major areas of ALM include:   ■ measurement and monitoring of liquidity and interest-rate risk. This includes setting up targets for earnings and volume of transactions, and setting up and monitoring interest-rate risk limits; ■ funding and control of any constraints on the balance sheet. This includes liquidity constraints, debt policy and capital adequacy ratio and solvency; ■ hedging of liquidity and interest-rate risk. This involves taking posi-