Treasury Operations (or Management) Syllabus - BBA-BI (PU)

Course Objectives

The course aims to equip students with knowledge and skills necessary to organize treasury department and manage treasury functions related to corporate liquidity, investments and risk related to these functions in a bank. It will also familiarize students with the tools and methods available to carry on these treasury functions.

Course Description

This course provides an understanding of the nature of treasury functions in a bank and equips the students with necessary skills, methods and tools to successfully carry on these functions. Specifically, the course covers the key aspects of corporate liquidity, investments and risk related to these functions in a bank. The topics covered in this course are – treasury management, payment system, asset-liability management, investment function, liquidity and reserve management, foreign exchange risk management, clearing and settlement, and treasury system.

Course Outcomes

On successfully completing this course, students will be able to:

• understand the role and position of treasury function in commercial bank;
• understand various payment systems and choose appropriate system for the payment;
• develop asset-management strategies and analyze duration gap;
• select appropriate instruments for investment and evaluate the investment risk in those securities;
• estimate liquidity and reserve requirements and develop strategies to maintain them at optimum level;
• indentify foreign asset liability position and foreign currency risk exposure;
• understand clearing and settlement system; and
• understand treasury technology and treasury management system.

Course Contents

Unit I: Treasury Management 4 hours

Role of the treasury department; treasury controls; treasurer job description; position of treasury department and its components – front, mid and back office – within the corporate structure.

Unit II: Payment Systems 4 hours

Payment systems overview; cash payments; check-based payments; large-value funds; electronic Transfers (Wire Transfer); small-value transfer or automated clearing house systems (ACH); and card based payment systems.

Unit III: Asset-Liability Management 8 hours

Asset-liability management strategies: asset management strategies, liability management strategy, fund management strategy; interest rate risk: forces determining interest rates, the measurement of interest rates, the components of interest rates; goal of interest rate hedging: interest-sensitive gap management, duration gap management; using duration to hedge against interest rate risk; limitation of duration gap management; and asset-liability management committee.

Unit IV: Investment Function 8 hours

Investment instruments; money market investment instruments: Treasury bills, short-term treasury notes and bonds, government agency securities, certificate of deposit, international Eurocurrency deposits, bankers’ acceptance, commercial paper, short-term municipal obligations; capital market investment instruments: Treasury notes and bonds, municipal notes and bonds, corporate notes and bonds; investment securities held by banks; factors affecting choice of securities; evaluating investment risk: security-specific risk, portfolio risk, inflation risk; and investment strategies – passive investment strategies, aggressive investment strategies.

Unit V: Liquidity and Reserve Management 8 hours

The demand for and supply of liquidity; reasons for liquidity problems; Strategies for liquidity managers; estimating liquidity needs; legal reserve and money position management; factors in choosing among the different sources of reserves; liquidity ratios; optimum bank liquidity; and NRB’s reserve requirements; the Basel rules.

Unit VI: Foreign Exchange Risk Management 8 hours

Foreign exchange rates and transactions: foreign exchange rates, foreign exchange transactions; sources of foreign exchange risk exposure; foreign currency trading; foreign asset and liability position; and purchasing power parity and interest rate parity.

Unit VII: Clearing and Settlement, and Treasury System 8 hours

Clearing and settlement systems: characteristics of clearing and settlement systems; overview of the clearing and settlement process; Fedwire, automated clearing house (ACH) system; clearing house interbank payments system (CHIPS); check clearing; the continuous link settlement (CLS) system; treasury systems: treasurer’s technology needs, treasury

management system; and SWIFT connectivity.

Basic Texts

1. Bragg, S. M., Treasury management. New Jersey: Wiley & Sons.
2. Rose, P. S., & Hudgins, S. C. Bank management and financial services. New Delhi:

Tata McGraw-Hill Education.

References

1. Gup, B. E., & Kolari, J. W. Commercial banking. New Delhi: Willey India
2. Saunders, A. & Cornett, M. M. Financial institutions management. New Delhi:

McGraw-Hill Education.

3. Choudhry, M. An introduction to banking – Liquidity risk and asset-liability

management. West Sussex, U K: Willy Publication.

4. Association of Financial Professionals. Essentials of treasury management