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Treasury Management Syllabus(Mid- Term)

Money market instruments treasury assets and bank assets(loans and advances), trsry manages both these assets size of the balance sheet for the bank, factors that determine bank assets size capital adequacy- undue risk if u will not take care on the amount of the assets that u r giving, safety and security and return- criterias of trsry mgmt, value to asset and to shareholders will determine the value of ur profitability, why and how r dey created and how are they these assets Credit taken by the bank, credit given by the bank COM- Credit, Operating, Market risk INCO terms- FOB, CII, Risks associated with them LIE- Liquidity, Interest Rate risks, Exchange rate risks Core industries- iron and steel, power, steel, cement, infrastructure- similarly core issue of T.M.- how effectively u r creating assets (trsry, bank, liabilities-trsry and bank liabilities- trsry, T-Bills, CPs, CDs, etc banks liab- deposits made and how dey match acc. 2 da interest of the bank so that it is matched and the liquidity is maintained and ALM) Tool- ALM it is a tool. ALM shud b concerned wid managing d risk and understand the financial goal of the org. Third, reform of 5 year- then 2 yr- mismatch, therefore, to avoid mismatch. (u cannot avoid accepting loans or giving loans, but u hav to avoid the mismatch) and u have a tool to deal with it i.e. ALM. Fourth, risk mgmt tool with d matching of assets and liability- by having idle funds in the form of deposits and use in times of adversities, it is important to use ALM so as to control the financial risk. U cannot control ur balance sheet size unless u do ALM.

Risks: - Credit risk is a fundamental risk in all banking decision - Liquidity Risk.both r compliment to each other. Without credit risk u cannot liquidity risk and vice versa. - Difference between credit and liquidity risk

ALM- based on 3 pillars - Information system- enables u to understand the situation of forward contracts (booked/cancelled, etc) - Forward exchange booking at branch level need to be monitored. Therefore, proper, direct, authentic and timely flow of information is very important. Role of back office operation- Control, how vital it plays in treasury office, supervise, audit. Everything depends on how efficiently ur back operations are working. Back office is the heart of treasury. Whereas, Front office is the functioning brain of the treasury management. Tax benefits in treasury, tax planning measures What is the finest possible objective of treasury? - 1st -v high net interest income- it shud b v high, secondly, 2nd- absolutely, good liquidity. 3rd- increase the wealth of shareholders