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Disclaimer
An Intro.
With the growth of International business and the
spread of Multinational Enterprise, the treasury
function has acquired a new meaning.
No longer the treasury operations restricted to
borrowing and lending of funds only to one money
market.
The treasury function now includes a diversity of
currencies which can be converted into one another
through the exchange markets and which are
transacted in money markets.
Structure of Treasury
Department
FUNCTIONS
RESPONSIBLE FOR
Front Office
Dealing/ trading/ ALM etc
(Treasury Management Group)
Middle Office
(Risk Management Group)
Back Office
(Treasury Settlement Wing)
Confirmations/ settlement/
reconciliation etc
The Role.
Managing Asset & liabilities of the bank.
Managing 'gaps' and the 'risks'.
Maximizing profits operating within acceptable
risk parameters,
Maximizing yield on treasury/inter bank
investment.
Providing rates to branches and customers.
Functions of
TreasuryManagement
Inter-Dept Chart
Functionality.
Lending to
Branches
Borrower
Spread
Branch
Depositor
Excess
Liquidity
Borrowing
Funding
TREASURY
Front
Office
Investmen
t
Reserve
Requirement
Treasury
Back Office
Functions
Money Market.
The money market is a wholesale market for low risk, highly liquid,
short-term & long term debt instruments.
It serves as an avenue through which banks and financial institutions
can offload their excess liquidity or meet their funding requirements.
To the government an organized money market represents a means for
it to implement its monetary policies in a more efficient manner.
Moreover, it provides it with a liquid market for securities through which
it can finance its own borrowing requirements.
The large role of commercial banks in the money market can be easily
envisioned by looking at their assets and liabilities.
A major portion of their liabilities are demand deposits. Another large
portion of bank liabilities are time deposits.
On the asset side, in addition to loans banks have part of their assets
invested in marketable securities.
M.M Objective.
Managing liquidity and interest risk.
Coordinating
with
corporate/retail
departments for assets/liability pricing.
banking
Purpose of M. M.
The need for financial institutions to indulge in
money market transactions arises primarily from the
reserve requirements imposed by the State Bank.
All commercial banks are required to maintain 19%
Statuary Liquidity Requirements (SLR) of their
Demand and Time Liabilities (DTL).
Commercial banks also have to maintain a 5% of DTL
in a cash reserve maintained with the SBP at 0%
interest. This ratio is known as the CRR (Cash
Reserve Requirement)
Treasury Bills:
Repurchase Transactions:
Call Money:
Clean Money:
FX MARKET.
Domestic markets trade in local currency and operate
under regulations governing domestic market. When
funds in any other currency are traded outside the
regulations governing domestic markets, then we
have the transaction of Foreign Exchange Markets.
Nostro Management.
Exposure Management
Blotter Management
FX TRANSACTION.
Any financial transaction that involves more than one
'convertible' currency is a foreign exchange transaction.
+10
84
+840
POUND
-10
138
-1380
YEN
-10
0.9
-9
TOTAL
NOP
-549/84
-6.53
= -1389/84
FEEL(USD)
= -16.53
Corporate Desk.
Fundamental Factors
Refer to the underlying economic & financial
conditions of the country.
Institutional Factors
Technical Factors
Analysis of how the market moves, rather than why it
moves.
Technical Factors
Thank You