Thread by @SAH16928046

What is the role of treasury management in the banking sector?

Note: (this thread only includes discussion on investment in T-Bills and other Long - term Fixed Income securities such as the Government Securities and other Bonds; additionally, the squaring of all book positions, in regard to Money Market and FX Asset class/es) & AL- Gap Mgmt

I have excluded investments in hybrids, convertibles, capital market products, share underwriting, and derivatives hedging /trading and the other complimentary Investment Banking Activities, which might also be included in the treasury job description at some retail banks

It varies from one banking business model to another, across jurisdictions.

No one size fits all rule applies in the case of treasury management at Retail Banks.

this thread does not provide oversight on treasury management practices undertaken at Insurance/ brokerage/ asset management or other forms of corporate treasuries that exist outside the financial sector.

Those models vary from one country to another.

The following can further elucidate the role of the Treasury Front & Back Office/s =>

1.Treasury primarily manages the overall Liquidity Levels at a bank.

a.Inter-market deals (placement of funds daily)

b.Inter-bank or branch banking deals (no profit is charged as such)

2.Pricing of Bank Loans aka Credits!

a.Yes, this is a basic treasury responsibility! Many confuse this with the CB / RB / SME Desk Responsibilities.

Branches offering both the Funded and the
Non -Funded Credit Facilities to customers, must seek guidance on pricing from the Treasury Department, at the bank, to analyze the opportunity cost of funds.

i.Note: Don't mix credit transfer pricing grid with the SOC - SCHEDULE OF CHARGES.

The Schedule of other charges added to the funded and non-funded credits in the form of underwriting fees, coupled with the( business banking and trade finance services charges deducted(in addition to credit approvals) are prepared jointly by the #CFO and the treasurer.

b.Fund transfer pricing policy is the responsibility of the Head of ALM / Treasury, by way of using the following modus operandi=>
i.Shadow factor prices are used to make comparisons
ii. Shadow factor balanced sheet is prepared.

iii.Opportunity costs of funds are analyzed.
iv.Computation of RAROC - (risk-adjusted return on capital)and RARORAC - (risk-adjusted return on risk-adjusted capital) is done using the shadow factor prices to meet risk budgeting requirements.

3.Providing Risk Management Desk Services to other arms of the bank

4.ALM - Asset Liability Management and integrating the strategy with Risk Management Policy / Strategy as per BRMC Guidelines =>

o It manages risks i.e. On Balance sheet and Off-balance sheet risks.

Treasury also manages the integrated AL Asset Liability Gaps
oIR / Repricing risk emanating from the overall gaps/ revaluation exposures.
oFX Risk on account of maturity and revaluation gaps.
oCredit risk on account of maturity gaps.

5. Economic Capital Management and compliance with the Basel Accords.
•This is done to keep the statutory requirements in check as issued by the BIS and endorsed by the CB in a jurisdiction.
@BIS_org Basel Assignments (market risk and other risks related to the Front Office)

oBasel III (Liquidity risk management thresholds and revised capital management standards).
oUpcoming #BASEL IV (FRTB).
oStress testing of exposures.
oCalculation of key #capital, profitability, balance sheet, portfolio, investment, and other key bank funds management analytics!

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