Assignment of TREASURY Management: Sir Khalid Sultan

Assignment of TREASURY
management
On
Financial institutions and Markets
Submitted To:
SIR KHALID SULTAN
Submitted By:
Atia Khalid BBFE-17-32
BBA (IBF)
6th semester (evening)
Session: 2017-2021
Assignment No. 3
Money Market
The money market refers to trading in very short-term debt investments. At the wholesale level,
it involves large-volume trades between institutions and traders. At the retail level, it includes
money market mutual funds bought by individual investors and money market accounts opened
by bank customers.
In all of these cases, the money market is characterized by a high degree of safety and relatively
low rates of return.
Capital Market
Capital markets are venues where savings and investments are channeled between the suppliers
who have capital and those who are in need of capital. The entities that have capital include retail
and institutional investors while those who seek capital are businesses, governments, and people.
Capital markets are composed of primary and secondary markets. The most common capital
markets are the stock market and the bond market.
Capital markets seek to improve transactional efficiencies. These markets bring those who hold
capital and those seeking capital together and provide a place where entities can exchange
securities.
Foreign Exchange Market

The foreign exchange market (also known as forex, FX or the currency market) is an over-the-
counter (OTC) global marketplace that determines the exchange rate for currencies around the
world. Participants are able to buy, sell, exchange and speculate on currencies. Foreign exchange
markets are made up of banks, forex dealers, commercial companies, central banks, investment
management firms, hedge funds, retail forex dealers and investors.
Foreign Exchange Assets

Foreign exchange assets held on reserve by a central bank in foreign currencies. These reserves
are used to back liabilities and influence monetary policy. It includes any foreign money held by
a central bank, such as the U.S. Federal Reserve Bank.
Treasury Risk
Treasury Risk is the risk associated with the management of an enterprise's holdings – ranging
from money market instruments through to equities trading. Liquidity and Capital Risk is
generally defined as the risk associated with an enterprise's ability to convert an asset or security
into cash to prevent a loss.
CRR
Cash Reserve Ratio (CRR) is a certain minimum amount of deposit that the commercial banks
have to hold as reserves with the central bank. According to the guidelines of the central bank of
a country.
SLR
Statutory Liquidity Ratio is the money a commercial bank needs to preserve in the form of cash,
or gold or government authorized securities (Bonds) before providing credit to their own
customers.
Assets & Liabilities

In its simplest form, your balance sheet can be divided into two
categories: assets and liabilities. Assets are the items your company owns that can provide
future economic benefit. Liabilities are what you owe other parties. In short, assets put money in
your pocket, and liabilities take money out.
Assets & Liabilities mismatches

An asset–liability mismatch occurs when the financial terms of an
institution's assets and liabilities do not correspond. Several types of mismatches are possible.
Mismatches are handled by asset liability management.
Asset–liability mismatches are important to insurance companies and various pension plans,
which may have long-term liabilities (promises to pay the insured or pension plan participants)
that must be backed by assets. Choosing assets that are appropriately matched to their financial
obligations is therefore an important part of their long-term strategy.
Few companies or financial institutions have perfect matches between their assets and liabilities.
In particular, the mismatch between the maturities of banks' deposits and loans makes banks
susceptible to bank runs. On the other hand, 'controlled' mismatch, such as between short-term
deposits and somewhat longer-term, higher-interest loans to customers is central to many
financial institutions' business model.
Asset–liability mismatches can be controlled, mitigated or hedged.
Assets & Liabilities matches

Asset/liability matching is the practice of attempting to project the specific timing of cash needs,
particularly outflows, by an investor and then making capital allocation decisions in a way that
places an emphasis on increasing the probabilities that the assets in the portfolio will be sold or
liquidated, producing sufficient passive income. In some other way, one might experience a
liquidity event that will make sure the greenbacks are there when the investor goes to reach for
them in the time of his or her need.
Part and parcel of an intelligently-designed asset/liability matching program is attempting to
generate satisfactory risk-adjusted results within the confines of the restrictions arising from the
expected cash flow timing needs
Forward Planning
Forward planning is a future-oriented exercise. It is concerned with the long-term future of a
large area, and identifying opportunities for growth and development so that land can be
managed in the best interests of the public.
Repo & Reverse Repo

The reverse repo rate is the rate at which the banks park surplus funds with reserve banks, while
the repo rate is the rate at which the banks borrow from the central bank. It is mostly done when
there is surplus liquidity in the market.
Rediscounting of Bills
A rediscount occurs when a short-term negotiable debt instrument is discounted for a second
time. The reason an issuer would do this is to cause a shift in a market that has a high demand for
loans. When liquidity in the market is low, banks can raise cash by rediscounting. A rediscount is
also a method for banks to obtain financing from a central bank.
Collateralized Borrowing and Lending Obligation (CBLO)

A collateralized borrowing and lending obligation (CBLO) is a money market instrument that
represents an obligation between a borrower and a lender as to the terms and conditions of a
loan. Collateralized borrowing and lending obligations allow those restricted from using the
interbank call money market in India to participate in the short-term money markets.
Q.no.1 How the treasury of commercial bank deploy surplus

funds profitably?
Commercial banks accept deposits from the public who have surplus funds. Individuals and
companies can deposit money with a bank by opening an account. Banks mobilize people's
savings by offering interest on the deposits.
Q.no.2 Difference between matching and mismatching Asset-

Liabilities of bank?
Assets & Liabilities mismatches Assets & Liabilities matches
An asset–liability mismatch occurs when the Asset/liability matching is the practice of

financial terms of an institution's assets and attempting to project the specific timing of
liabilities do not correspond. Several types of cash needs, particularly outflows, by an
mismatches are possible. investor and then making capital allocation
Mismatches are handled by asset liability decisions in a way that places an emphasis on
management. increasing the probabilities that the assets in
Asset–liability mismatches are important to the portfolio will be sold or liquidated,
insurance companies and various pension producing sufficient passive income. In some
plans, which may have long-term liabilities other way, one might experience a liquidity
(promises to pay the insured or pension plan event that will make sure the greenbacks are
participants) that must be backed by assets. there when the investor goes to reach for them
Choosing assets that are appropriately in the time of his or her need.
matched to their financial obligations is Part and parcel of an intelligently-designed
therefore an important part of their long-term asset/liability matching program is attempting
strategy. to generate satisfactory risk-adjusted results
within the confines of the restrictions arising
from the expected cash flow timing needs
Q.no.3 How risk management is executed by the treasury of

bank?
Treasury Management In Bank. ... The treasury department of a bank is responsible for balancing
and managing the daily cash flow and liquidity of funds within the bank. The department also
handles the bank's investments in securities, foreign exchange, asset/liability management and
cash instruments.

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Assignment of TREASURY

6th semester (evening)

Foreign Exchange Market

Foreign Exchange Assets

Assets & Liabilities

Assets & Liabilities mismatches

Assets & Liabilities matches

Repo & Reverse Repo

Collateralized Borrowing and Lending Obligation (CBLO)

Q.no.1 How the treasury of commercial bank deploy surplus

Q.no.2 Difference between matching and mismatching Asset-

An asset–liability mismatch occurs when the Asset/liability matching is the practice of

Q.no.3 How risk management is executed by the treasury of

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