treasury management- final

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Treasury Management

Presented By:

Deepa Jaiswal

Allen Lopes

Chirag Pagdhare

Staynel Rodrigs

Asha Tilwani

MMS-II 2012-12

GROUP NO: 4

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Introduction

It is an crucial tool of finance.

It is the management of cash, fund, currency, bank

and financial risk

In this there is estimation of risk for investment of

cash.

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Cont.

A place where stores of treasures are kept; the place of

deposit, care, and disbursement of collected funds

Collects funds and disburses money.

Managing Funds through proper allocation

Responsibilities fall under the scope of CFO

The CFOs responsibilities include capital management, riskmanagement, strategic planning, investor relations and

financial reporting

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Treasury Management

Treasury forms a vital part of any commercial banks activities. It isthe window through which the bank raises funds from or places

funds in markets

Traditionally, banks in India, the role of Treasury was limited to

ensuring the maintenance of RBIs stipulated norms for cash reserveratio (CRR) & Statutory Liquidity Ratio(SLR)

The deregulation of financial markets began with the shift to

market- determined exchange rates and moved ahead with the

freeing of Bank deposit and lending rates

The RBI began using monetary intervention tools such as LAF and

Open Market Operations (OMOs) to manage liquidity

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Banks Treasury Departments

A Fixed Income or Money Market desk that is devoted to buying and

selling interest bearing securities

A Foreign exchange or "FX" desk that buys and sells currencies

A Capital Markets or Equities desk that deals in shares listed on the stock

market

Proprietary Trading desk that conducts trading activities for the bank's own

account and capital

ALM desk that manages the risk of interest rate mismatch and liquidity

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Integrated Treasury

Integrated Treasury refers to integration of money market,securities market and foreign exchange operations.

Objectives

a. Meeting reserve requirements

b. Provision for adequate and timely liquidityc. Global cash management

d. Optimizing profit by exploiting market opportunities in forex

market, money market and securities market

e. Risk managementf. Efficient merchant services

g. Assisting bank management in ALM

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OBJECTIVES OF INTEGRATED TREASURYMANEGEMENT POLICY

To maintain Statutory Liquidity Ratio (SLR) and Cash ReserveRatio (CRR) in terms of RBI guidelines

To achieve optimum level of return from the investment

operation including forex transactions keeping in mind the

liquidity and risk aspects of the portfolio. To manage liquidity i.e. to bridge temporary mismatch in fund

position by resorting to various options viz. Call, CBLO etc.

To maintain maturity pattern of investments consistent with

the banks need for funds and in line with Asset Liabilitymanagement Policy of the Bank

To manage credit risks, liquidity risk, market risk and

operational risk in tune with banks risk management policies

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Integrated Treasury Department

Make investment in their ownaccount

SLR, CRR, CP, CD, TB, Bonds &Debentures, Equities and various

other derivatives

DomesticTreasury

Operations

Conduct operation on behalf of

clients Spot and forward markets, foreign

exchange swap markets , FCNRand Nostro Account.

Forex TreasuryOperations

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Structure of Treasury Department

Function Responsible for

Front office Dealing

Mid-Office Risk management, accountingand management information

Back office Confirmations, settlement andreconciliation

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FRONT OFFICE

BACK OFFICEMID OFFICE

Dealing

MIS

settlement

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Bank Treasury Departments

Money market desk

A Fixed Income or Money Market desk that is devoted to buying

and selling interest bearing securities

Foreign exchange or FX desk

A Foreign exchange or "FX" desk that buys and sells currencies

Equities DeskA Capital Markets or Equities desk that deals in shares listed on

the stock market.

Derivatives Desk

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http://en.wikipedia.org/wiki/Fixed_Incomehttp://en.wikipedia.org/wiki/Money_Markethttp://en.wikipedia.org/wiki/Foreign_exchange_markethttp://en.wikipedia.org/wiki/Capital_Marketshttp://en.wikipedia.org/wiki/Equitieshttp://en.wikipedia.org/wiki/Equitieshttp://en.wikipedia.org/wiki/Capital_Marketshttp://en.wikipedia.org/wiki/Foreign_exchange_markethttp://en.wikipedia.org/wiki/Money_Markethttp://en.wikipedia.org/wiki/Fixed_Income


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Functions of Treasury Management

Reserve Management & Investment

Cash Management

Liquidity & Funds Management

Risk Management

Asset liability management

Transfer Pricing

Derivative products

Arbitrage

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Reserve Management & Investment

Meeting CRR/SLR obligations

a) CRR4.75%

b) SLR23%

Appropriate mix of investment portfolio

Cash Management

Control & care of the cash assets and liabilities of the

organization. Selection of investment products, investment brokers,

methods of borrowing, cash management informationsystems.

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Liquidity & Funds Management

Analysis of cash flow arising out of asset liabilitytransaction

Fund various asset of balance sheet

Policy inputs to strategic planning and yield expected incredit and investment.

Risk Management

Changes in Interest rates Increasing NPAs

Increasing level of disintermediation

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Transfer Pricing

Transfer of funds to related party.

Assist in enhancing profits

Performance evaluation

Derivative Products

Develop Interest Rate Swap and other cross currencyderivative products

Hedge banks own exposure and also sell to customers

Arbitrage

Risk less profits

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What is Asset Liability

Management

An attempt to match : Assets & Liabilities

In Terms of : Maturities & interest rate sensitivities

To Minimize: Interest rate risk & Liquidity Risk

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Asset LiabilityManagement

AssetManagement

How Liquid areassets of banks

LiabilityManagement

How easily bankscan generate loans

from market

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ALM

ALM is an integral part of the financial management process

of a bank.

ALM is concerned with strategic balance sheet management

involving risks caused by changes in interest rate, exchange

rates and liquidity position of the bank.

ALM can be termed as risk management technique designed to

earn an adequate return while maintaining a comfortable

surplus of assets beyond liabilities.

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Thank You

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treasury management- final

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