Treasury

Policy Lecture – Session 4

Treasury Investment Policy (Treasury Policy)

1- Scope & Objective:

• Outlines policies related to the Treasury Function & the
Treasury’s governance structure.

• Or refers to other sub policies


• Defines optimal standards, controls and the dealing
environment covering all Treasury functions, in adherence
to:

o SBP regulations

o Counterparty risk limits (Credit Policy)

o Market risk limits (Market Risk Policy)


o Compliance with SBP Code of Conduct & the Bank’s
Ethics Standards (HR Ethics Policy)


o Compliance with AML guidelines of the bank (AML &
CFT Policy)






2- Role of the Treasury Function

Ø Liquidity Management – Treasury’s most important role is to
efficiently manage the overall funding position of the Bank, to ensure
State Bank of Pakistan’s(SBP) liquidity requirements are met at all
times. Treasury must operate within the risk parameters specified
by the SBP, approved by the Asset Liability Committee (ALCO) and
assigned to Treasury in order that demands for funds placed on the
Bank on any day can be met without having to resort to extraordinary
measures.

Ø FX Exposure Management: Treasury is also tasked with ensuring
that the total FX exposure for the bank is managed within the SBP &
ALCO prescribed limits.

Ø Interest Rate Exposure Management: Treasury is required to
operate within prescribed interest rate exposure limits as it transacts
in Money & Fixed Income Markets. (In Pakistan, due to non-
application of a proper Funds Transfer Pricing Mechanism, Interest
Rate Exposure Management is not conducted for the entire
institution as it should.

Ø Customer Service: Treasury must have the capability to provide
professional high-quality transactional and advisory services to the
bank’s customers (Corporate, Retail, Commercial) relating to FX,
Money Markets, Fixed Income & Derivatives – both Conventional &
Islamic.

Ø Revenue Generation: While clear priorities of Treasury are efficient
liquidity management & professional customer service, it is also
responsible for generating substantial revenues for the bank. This
revenue generation is to be clearly budgeted at the beginning of the
year for each of Treasury’s areas of operation. The budget must be
based on realistic projections of transaction volumes, spreads and
trends in interest rates, FX & equity markets.


3- Treasury Organization in Banks





Global Treasurer
Markets Research Treasury Administration



FX Trading FX Sales ALM FI Trading Derivatives Trading



International Islamic Equity
Treasury Treasury Trading






















 4- The Treasury Environment – Segregation

Governance dictates reporting-line segregation of the three critical
departments that form the Treasury Environment:


Treasury Front Office (Dealing Room + Research + Treasury Admin):
Ø Reports to Treasurer
Ø Treasurer reports to the CEO


Treasury Middle Office (Treasury Risk Management):
Ø Reports to Head of Treasury Middle Office
Ø Reports to Head of Market risk
Ø Reports to CRO
Ø Reports to CEO

Treasury Back Office (Payments Processing)
Ø Reports to Head of TROPs
Ø Reports to Head of Operations
Ø Reports to CEO


This segregation of duties is a critical compliance requirement for good
governance of the Treasury function. The aim is to minimize fraud
through collusion.

5- ALM
6- FX Trading
7- FX Sales
8- International & Domestic
Rates & Derivatives Trading
9- Equity Trading
10- International Treasury
11- Islamic Treasury
12- Treasury Research Unit


 13- Dealing Authority & Operating Guidelines


a- Dealer’s Authority

Trading is to be carried out in accordance with:
Ø Approved limits of Counterparties by Financial Institutions &
Global Trade Services (FI & GTS)
Ø Brokers approved by ALCO
Ø Dealer limits delegated by the Treasurer
o With the Treasurer’s dealing limits’ approved by ALCO.

Segregation Safeguards
Dealers along with Chief Dealer are only authorized to sign the
“blotters” or any amendments thereto. They are not be given any
operational authority vis-à-vis settlements and delivery, which rests
with Treasury Operations.

b- Adherence to Limits and Regulatory Requirements:

Ø All existing approved Limits are to be observed.
Ø Amendments to the Limits, as and when approved by respective
approving authorities, are to be implemented.
Ø Adherence to the Limits is monitored and reported by Treasury
Middle Office (TMO) on a Real-time Basis (ideal, but usually it is
on an End of Day basis)

c- Transactions with Related Parties:

Transactions with related parties
Ø are to be at an arm’s length price
Ø appropriate disclosures pertaining to related party transactions
are to be made in accordance with the Bank’s Related Party
Policy.

d- Dealing at off-market rate:

Ø Historical Rate Rollovers: Deals for rollovers of maturing
forward contracts at non-market rates are prohibited.

Ø Approval of off-market FX inter-bank deals are to be approved
by the Treasurer prior to transacting the deal. FX inter-bank
deals not falling within +/- X% (usually 2 – 3%) of SBP FX
revaluation rate are to be considered off-market.

Ø All off-market FX inter-bank or TMU deals must be flagged by
Treasury Middle Office and reported to the Treasurer and Head
of Market Risk on a periodic (weekly/monthly) basis.

e- Frivolous Quotes & Spoofing:

Ø Dealers are barred from making quotes which they have no
intention of honoring and are clearly designed to mislead market
participants. Apart from being unprofessional, such spoofing
practice can damage the market and compromise their own as
well as their employer’s reputation.

Ø Dealers should promptly report to the Treasurer whenever they
spot other brokers or dealers acting in engaging in “spoofing”

f- Off-Business Hours and Off-Premises Dealing

Ø Off-Business Hours’ or ‘After-Hours’ refers to:

o The period outside Treasury’s normal working hours:
§ between 9:00 am and 5:00 pm,
§ Monday through Friday

Ø After-Hours dealing is only allowed in exceptional
circumstances, and solely for the purpose of closing an existing
position

Ø A list of dealers authorized by the Global Treasurer to deal in off-
premises or after-hours transactions must be prepared with a
copy to

o the respective Dealers,
o Chief Compliance Officer,
o Head-Centralized FX Processing,
o Head-Treasury Operations
o Head Market Risk (TMO).

The above authorization are to be subject to prior written approval of
State Bank of Pakistan.


Ø On-Premises Dealing are:
o all deals done
§ within the Dealing Room,
§ using the Bank’s approved mode of communication
o Any deviation from this guideline will be considered ‘Off-
Premises.’

Ø Off-Premises deals are to be executed in exceptional
circumstances and after obtaining prior approval of the
President & CEO of the Bank and State Bank of Pakistan through,
the Global Treasurer, Dealer authorized by the Global Treasurer
may conduct an ‘off-premises’ deal.

Ø Reporting of every “after-hours’ and/or ‘off-premises’ deal
along with its SBP & internal prior approval must be done by the
Treasury Front Office to Treasury Operations and Market Risk
 Management (TMO) through immediate means of
communication.


g- Approved Mode of Communication for Dealing

This section approves dealing room communication modes such as:

• Reuters
• Bloomberg
• Correspondent Bank dealing platforms
• Brokers, approved by ALCO.
• Landline Telephone with Voice Recording

Deals done through the Telephone must be followed by a written
confirmation from the counterparts/brokers.
Ø Prohibition of Use of Mobile Devices for Transacting Business

Use of wireless communication devices for dealing (whether they are
privately owned or Bank’s owned) is strictly prohibited.

The use of wireless communication devices within the dealing room is
strictly prohibited except in an emergency or disaster recovery
situation.

Any breach of this instruction will be subject to strict disciplinary
action against the staff involved.




 Ø Recording Telephone Conversations and Electronic Text
Messages:

1. Conversations Recorded: All conversations undertaken by
Dealers and brokers must be recorded, together with back office
telephone lines used by those responsible for confirming deals
or passing payment or other instructions, without any deliberate
or inadvertent interruption.
2. Recordings Saved & Stored: Complete record of electronic
communication modes used in the process of transacting
business should be saved & stored properly.1
3. ITG Management: Voice Recording is system based.
Maintenance of machine is managed by ITG through vendor.
Back-up of the data is also managed by ITG.
4. Access Controlled: ITG must ensure that access to taping
equipment, tapes and electronic text message records, whether
in use or in store, is strictly controlled in order to prevent
tampering.
5. Replaying Recording in Disputes: Treasurer and Head of
Treasury Operations both approve written request allowing
Head of Treasury Operations to arrange listening to the recorded
conversations for any disputed deals.


Ø Dealing Time

SBP vide DMMD Circular No. 18 of 2011 dated October 14, 2011, the
cut-off dealing time for all permitted Foreign Exchange, Derivatives
and Money Market transactions are as follows:

Monday to Friday : 9:00 am to 5:00 pm

1 Treasury Operations (Back Office) keeps the hard copies of all electronic communication modes transactions prints for 10 years.
 o Foreign Exchange/Derivatives transactions not involving
Pak Rupees and the transactions on account of inward
Home Remittances will be permitted up to 6:00 pm,
Monday to Friday.

o All Foreign Exchange transactions executed by Authorized
Dealers during the day should be incorporated on the same
end of day Foreign Exchange Exposure and reported to
State Bank of Pakistan through FXCRS system.

Ø Control Policy for Access to Dealing Room


o Only the authorized personnel allowed to enter the
dealing room controlled through access control system
installed at all entrances of the dealing room.

o Access to the dealing room by both non-treasury bank
personnel and outside visitors should be limited in terms
of frequency and duration.

o All staff should be vigilant and immediately report to senior
management any suspicious activities or unusual requests
for access to or information on treasury business systems.

• Treasurer to authorize the right of access to the dealing room.

• The list of personnel authorized to enter into the Dealing Room
are to be prepared and kept in record by the Chief Dealer, duly
signed by the Global Treasurer.

• The visitors’ log book are to be maintained, reviewed and signed
by the Chief Dealer on a monthly basis. Any anomaly found by
 the Chief Dealer should be reported to the Global Treasurer
immediately.

Ø Dealing Room Access Time

o Normal access time to the dealing room is to be observed
by all personnel authorized to access the Dealing Room:

From Monday to Friday: 8:00am to 8:00 pm

o The Treasurer and Chief Dealer are allowed to access the
Dealing room round the clock (including holidays). Access
to Dealing Room are to be prohibited on all holidays
including Sundays for all other staff. In case of emergency,
dealing personnel are to be allowed access to dealing room
with the prior permission of the Global Treasurer or Chief
Dealer.

o The Global Treasurer/Chief Dealer are to be authorized to
allow access to dealing room to a Dealer after specified
hours on working days up to a specified time on business
considerations. The Chief Dealer isrequired to keep record
of all such exceptions specifying name of the dealer
authorized by him with date and time.

o There should be at least two authorized personnel present
in the dealing room during the allowed dealing room
access time.




 Ø Treasury Morning Meeting

o All dealers are required to attend a meeting prior to the
commencement of the day’s trading and sales activity. This
meeting is held on every working day at 8:30 AM and is
presided over by the Global Treasurer.
o During the meeting, research analysts are required to
provide a brief update with regards to political and
economic developments within the country that are
pertinent to the activity of the Treasury.
o Dealers are required to present concise reports and
outlooks on trading levels in the equity, foreign exchange,
fixed income and money markets, highlighting any
significant change from the previous trading day or any
significant change expected in the trading day to
commence.
o Treasury Sales dealers are required to relay volumes
traded on the previous day. Brief updates with regards to
the international fixed income and currency markets are to
be presented.
o Dealers are expected to highlight the release of any data
that would contribute to moves in the international fixed
income and currency markets.
o Attendance in the meeting is essential for dealers to gain a
holistic perspective on all the factors that are playing a role
in the development of both the domestic and international
markets.
o This perspective is integral as movements in the financial
markets have a high tendency to be interconnected. As
knowledge of these developments enable dealers to make
optimal decisions once the trading day has commenced.
o Timely attendance of the morning meeting is mandatory
for all dealing staff.


> Treasury SBP & Nostro Accounts

o Reconciliation Accounts

TROPS is responsible for reconciling NOP & both category of
accounts at the end of each business day.

• FX Position - NOP
• Current Account with SBP Karachi
• FYC Nostro Accounts

o Monitoring

• Above mentioned accounts are monitored on daily basis
• differences are recorded and prepare and followed up
• Entries not reconciled after proper follow-up fall under the
category “Exceptions”.

o Exceptions

Following three categories exists for exceptions:

• Daily Outstanding
• Outstanding for One month
• Outstanding for Three months

o Reporting

Exceptions are reported to the following:

• Daily Outstanding to the Head of Treasury Operations
• Outstanding for One month to the GM - Head Centralized FX
Processing
• Outstanding for Three months to the GE-Global Operations
 o Documentation and Record Keeping

Documentations and record keeping/archiving are mainly performed
by Treasury Operations. Treasury Operations has comprehensive and
approved guidelines on documentation and record keeping viz.
“Registers/Records/Reports Printing and Retention Policy” for Bank.

Treasury Front Office and Market Risk Management (TMO) also to
maintain and keep their records/ reports, (limits and approvals) and
correspondence for a minimum period of one year. For disposal of old
records Treasury Front Office must take prior approval from Global
Treasurer and Market Risk Management (TMO) is required to take
prior approval from Head of Market Risk.






















14 - INVESTMENT POLICY FRAMEWORK

Treasury’s Investment Policy Framework encompass following
parameters:
a- Investment objectives / guidelines

The Treasury will conduct its investment operation with following
objectives:
1. Prudence

Safety of principal is the foremost objective of Treasury. Investments
of the bank are to be undertaken in a manner that seeks to ensure the
preservation of principal.
2. Liquidity

The investment portfolio must remain sufficiently liquid to enable

Treasury for meeting demand and time liability requirements which
might be reasonably anticipated.

3. Yield

The Treasury must invest with the objective of optimizing risk-return

on its investments with the following in mind;

o Ensure meeting mandatory Statutory Reserve (SLR/CRR)

requirements.
o Maintain efficient functioning of all Treasury business activities
with the objectives of safety, liquidity and yield.
o Undertake maturity profile management (all currencies) to
safeguard the bank from Market and Liquidity Risk.
o Ensure Mark to Market (MTM) of HTM & AFS securities
portfolios is carried out by applying official daily closing prices
(Quoted by the State Bank of Pakistan, through Reuters page
 PKRV) and are to be performed by Market Risk Management
(TMO).
b. Authorities of Lines & Limits

All dealing is to take place within prescribed and approved limits:

Ø FI & GTS approves “lines” or exposure limits for dealing with
Banks, Financial Institutions and other counterparties.

Ø Risk approves “lines” or exposure limits for corporate
counterparties.


Ø ALCO authorize “dealing limits” to the Treasurer who further
authorize Chief Dealer/Dealers to deal on behalf of the bank
with the counterparties (only within approved “lines” and
“limits”).
c. Trading Parameters

• All necessary Dealing Room controls and standard operating

procedures must be approved and implemented by Global
Treasurer. Any trade except within the defined parameters
should be done with prior approval of Global Treasurer.
• The functions of Risk Management, Compliance, Finance, Trade
Settlement and Reconciliation of Treasury related Nostro
Transactions/Vostro accounts must be independent of Dealing
Room.
• Trading are to be done within the parameters defined and
approved by ALCO and defined by SBP.
• Credit limits of counterparties favouring various Financial
Institutions, which are approved by FI & GTS should be observed
strictly to avoid any risk exposure caused by breach of limit.
Trading in government securities within the secondary market is
 allowed under the head specific for trading (classified by SBP) as
‘Held for Trading’.
• All Dealers should strictly comply with ‘Dealer’s Per-Deal Limits’
authorized by the Global Treasurer, within the ‘Treasurer’s
Dealing Limit’ allocated by ALCO. Any deviation will be resulted
in breach of discipline and must be reported to the Global
Treasurer immediately. In case, transaction exceeds any
individual ticket limit, dealer should consult next higher
authority before quoting price.
• Deals executed within the allocated dealing limits of the Dealer
approved by the Global Treasurer, do not require further
authorizer.

d. Credit & Market Risk Management Parameters

Credit & Market Risk Management are independent of the dealing or
transaction execution function. Credit & Market Risk Parameters are
to be governed by Bank’s approved Credit Policy Manual and Market
& Liquidity Risk Policies.

e. Classification of Permissible Investments / Products

Treasury invests in securities issued by Government Agencies /
Government of Pakistan (including but not limited to Treasury Bills,
PIBs and Ijara Sukuks) diversifying them across the entire yield curve.

SBP defines investment portfolio classifications2 as:

Ø Held to Maturity (HTM): The securities acquired by the
banks/DFIs with the intention and ability to hold them up to
maturity.
Ø Held for Trading (HFT): The securities acquired by the
banks/DFIs with the intention to trade by taking advantage of

2 Ref. SBP BSD Circular No. 10 of 2004 dated July 13, 2004, regarding ‘Revaluation Surplus/Deficit’.
 short-term market/interest rate movements. Such securities are
to be sold within 90 days from the date of their classification as
‘Held for Trading’ under normal circumstances. These securities
are Market-to-Market daily.

Ø Available for Sale (AFS): The securities which do not fall within
the above two categories will be classified under this category.
These securities are Market-to-Market daily.

Separate PVBP Limits are in place to monitor exposures under HFT and
AFS portfolios.



f. Accounting Issues/Policies

International Accounting Standards (IAS), as applicable in Pakistan, are
implemented on the basis of classification of securities in HTM, AFS
and HFT categories.

The categorization of securities is decided at the time of acquisition
and is also be explicitly stated in related the Proposals/Deal Tickets or
Slips. As for accounting and treatment of revaluation surplus / deficit,
following SBP directives will be adhered to:

• SBP BSD Circular No. 10 of 2004 dated July 13, 2004 titled
Revaluation Surplus / Deficit
• SBP BSD Circular No. 11 of 2004 dated August 4, 2004 titled
Revaluation Surplus / Deficit
• SBP BSD Circular No. 14 of 2004 dated September 24, 2004 titled
Revaluation Surplus / Deficit
• Para 4, Regulation R-8 titled Classification and Provisioning for
Assets, of SBP Prudential Regulations for Corporate /
Commercial Banking.
15- GUIDANCE ON FUNDS TRANSFER PRICING

Ø ALCO has the responsibility for approving the Transfer Pricing
policy of the Bank
Ø Treasury & Finance Departments have joint responsibility for
proposing the Funds Transfer Policy to ALCO for approval.
Ø
Most often the FTP is KIBOR-based; it uses 1-month or 3-month
KIBOR as the reference rate.

Basis for KIBOR: Banking book is based on KIBOR; therefore, for

consistancy within the bank, KIBOR is often employed as the reference
rate for money market portfolios.

The FTP Mechanism:

All money market and fixed income portfolios (Repo/Reverse Repo,

AFS T-bills & PIBs) are funded at “1-Month KIBOR less X bp” whereas
call portfolios are charged at “one-month KIBOR”.

Basis for 1-month KIBOR less 25bps for securitized portfolios & only 1-
Month KIBOR for Call/clean portfolios: KIBOR is a call/clean
benchmark and slightly higher than rate for collateralized
repo/reverse repo transactions. Therefore, funding rate for all
securitized transactions is KIBOR less 25bps.












16- GUIDANCE ON LIQUIDITY MANAGEMENT

o Introduction:

It is the policy of the Bank to maintain adequate liquidity at all times
to be in a position in the normal course of business
Ø to meet all obligations to repay depositors,
Ø to fulfill commitments to lend
Ø to meet any other commitment it may have made.
Ø Of critical importance is the need to avoid liquidating assets or
raising funds at unfavorable terms resulting in long term damage
to earnings and reputation of the Bank.
Ø Prudent liquidity management is of paramount importance as
the ultimate cost of lack of liquidity is being out of business.

Adequate liquidity position must be ensured by:

§ Controlling the bank’s dependence on particular types of
deposits through diversified funding.
§ Establishing an appropriate stock of marketable assets for use in
a liquidity crisis.
§ Ensuring that the bank’s balance sheet is not excessively
weighted with illiquid assets.
§ Monitoring the potential liquidity impact of off-balance sheet
activity.

Reinforcing the ‘Liquidity Risk Policy’ is the clear principle that
management is directly responsible for liquidity management.



 17- Policy Statement - ALCO Responsibilities

a. Exposure Management

ALCO performs Exposure Management in accordance with its

responsibilities outlined above.

b. Liquidity & Funding Decisions

Global Asset Liability Committee (Global ALCO) is the forum to oversee
liquidity risk management in the Bank in line with the directions
provided by the BRMC / BOD. Global ALCO has responsibility for
ensuring that the ‘Liquidity Risk Policy’ is adhered to on a continuous
basis.

The Bank must be self-sufficient in its funding operations, in addition
to fully complying with regulatory liquidity requirements.
c. Investment Decisions

‘ALCO’/‘Equity Investment Committee’ make investment decisions,
including approving policy, monitoring compliance and periodically
reviewing portfolio performance.
d. Contingency Plans - Business Continuity

A most essential element of this business strategy is the Business
Continuity Plan (BCP) which helps an organization maintain a certain
level of its operations and services even in the face of any disasters,
accident or crisis.

Treasury, in coordination with Business Continuity Planning (BCP)
Department, must implement BCP to operate from DR site; this would
ensure functioning of the Bank in the situation where the main
Treasury location is not available due to crisis/disaster.

• Treasury Business (Treasury Front Office)
• Market Risk Management (TMO)
• Treasury Operations (Treasury Back Office)

e. Contingency Funding Plan (CFP)

The aim of ‘Contingency Funding Plan’ is to have a functional plan to
keep the Bank running smoothly in case of an unforeseen liquidity
crisis. This plan must be implementable at a moment’s notice if
certain crisis liquidity thresholds are crossed and must cover both
contingencies:
Ø general market turbulence (systemic risk)
Ø bank-specific emergency

Ø Scenario testing: For each scenario, analysis of existing assets
and liabilities is done to determine the convertibility of assets
into cash depending upon realistic time frames and run-off
assumptions on the liability side.

Ø Further, mobilization of all possible untapped sources of funds is
envisaged to determine how much new money could be brought
by the Bank under the particular scenario.


Important Components of CFP

Planning for contingency funding requires clear establishment of
criteria that trigger the beginning of a contingency situation and
specify what needs to be done at that point. The required actions
include, but are not limited to the following:

• Advise the ALCO on an immediate basis.
 • Identify the specific but appropriate plan to be activated for
contingency situation.
• Review the situation outlined in the CFP, and determines whether
any modification is required to cope with the current situation.
• Establish and obtain approval for a new funding plan to be
followed.

The Bank has in place a comprehensive “Contingency Funding Plan”
that is reviewed by the Treasury & Market Risk Management and is
approved by the ALCO.

f. ALM information system

The ALM function requires a system that gathers information
accurately and in a timely manner. Collecting accurate data in a timely
manner is a challenge in banks with wide network of branches in
respect of foreign exchange, investment portfolio and money market
operations. ALCO must ensure such an effective information gathering
system is available to the ALM function.


g. Product Pricing Approvals

ALCO will approve interest rate setting mechanism for Assets and
Liabilities products.
h. New Product Launch

Any new product, prior to being launched, should be formally
introduced by the business unit. This would require a detailed paper
on the subject covering the following points in detail:

• Salient features of the product,
• Existing market depth and product liquidity conditions,
• Compliance with regulatory requirements and internal policies,
• Targeted client base,
• Procedures and processes involved,
• System requirement and capabilities,
• Inherent risks (market, liquidity, credit & operational, etc.),
• Personnel skill base,
• Expected revenue generation,
• Proposed limits,
• Accounting, systems and data capturing,
• Laws and regulations

Based on this paper, ALCO decides on the product and allocates limits
for it.
i. Funds Transfer Pricing Mechanism

ALCO has the responsibility for deciding the Funds Transfer Pricing
policy of the Bank including the methodologies to be used and the
applicable rates.

j. The ALCO Information Pack

Relevant departments are required to give input for reports to be
presented to ALCO for reviewing the activities done within the period.

Following reports are to be presented in ALCO by the Global Treasurer,
as and when required. The list of these reports are examples and is
not meant to be exhaustive:

• Domestic Economy Update (Prepared by Research Unit)
• Domestic Economy - Macroeconomic Indicators (Prepared by
Research Unit).
• Comparison of KIBOR, Repo rates, T-bills & PIBs cut-offs and
secondary market yields vs. presented in last ALCO meeting
(Prepared by MM Desk).
• Domestic Yield Curves – Government Securities (Prepared by
MM Desk).
Banking Book: Maturities and Weighted Averages (Prepared by
MM Desk).
• Banking Book - Maturities up to 1 year (Prepared by MM Desk).
• Banking Book - Maturities 2 year to 10 year (Prepared by MM
Desk).
• Banking Book - AFS & HTM Portfolio Maturities (Prepared by MM
Desk).
• Banking Book - Positioning and Strategy (Prepared by MM Desk).
• Group Deposits – Period End (source: Finance)
• Domestic Deposits – Period End (source: Finance)
• Domestic Deposits Segment Wise – Period End (source: Finance)
• Domestic FCY Deposits Currency Wise – Period End (source:
Finance)
• Group Deposits – Average (source: Finance)
• Domestic Deposits – Average (source: Finance)
• Domestic Deposits Segment Wise – Average (source: Finance)
• Domestic Current Deposits – Chart (source: Finance)
• Domestic Total Deposits – Chart (source: Finance)
• Domestic Deposits: Market Share – Chart (source: Finance)
• Domestic Deposits: Weekly Market Share – Chart (source:
Finance)
• International Deposits (source: Finance)
• International Total Deposits by Locations (source: Finance)
• IPD Deposits Portfolio – By Segments (source: Finance)
• Deposits – IPD – Breakeven Levels (source: Finance)
• IPD Deposits Portfolio – Weighted Averages (source: Finance)
• Domestic Net Advances (source: Finance)
• Breakup of Domestic Performing Advances by Segments (source:
Finance)
• Domestic Average Performing Advances: By Segments (source:
Finance)
• Gross Advances to Deposits Ratio – Chart (source: Finance)
• Consumer Products - Pricing (Provided by Fincon-Consumer
Banking).
• FCY Sources and Uses (Prepared by FX Desk, Treasury-Front
Office source: Treasury Operations).
• FCY Rates for FE-25 Deposits (Provided by FX Desk).
• Global Economy – US, Eurozone and UK (Prepared International
Rates Unit).
• Global Economy – China & Oil (Prepared by International
Treasury & Research Unit).
• Global Economy – Country Snapshot (Prepared by International
Rates Unit). Global Fixed Income FCY Portfolio (Prepared by
International Treasury & International Rates Unit).
• Cash as proportion of CASA Deposits (Provided by Global
Operations).
• Market and Liquidity Risk Reports (Provided by Market Risk
Management – TMO).
• Any Other Business with the permission of Chair.
18. BROKER EMPANELMENT PROCESS:

The process for selection of brokers for FX, Money Market, Fixed
Income and Equity businesses is:
Ø initiated with Treasury proposing the names to FI.
Ø FI in consultation with Compliance conducts reasonable due
diligence / KYC
Ø Once Compliance clears the list of brokers in light of satisfactory
KYC, the same is presented before ALCO jointly by Treasury and
FI for final enlistment.
Ø The list will be reviewed/approved by ALCO annually.
Ø Global Treasury ensures that broker usage is well diversified and
business done through them is within concentration limits.

 a. Routing Transactions:

Ø FMAP recommended rates for brokerage are to be followed.
Ø Dealers are not allowed to negotiate brokerage or waive
brokerage. The only exception to this condition would be
transactions that are executed purely for “Routing Purpose”, i.e.,
name change due to credit limits constraints between
counterparties after disclosure of names3.
Ø All such deals must be clearly tagged in the system as ‘Routing
Transactions’ by Treasury Front Office (TFO) for periodical
checking by Internal Audit and Compliance.
Ø System based MIS reports, which detail all routing transactions
across different business should be available.
Ø Treasury Operations must provide report of such deals to Global
Compliance on quarterly basis.

Bank dealers should give brokers prior indication of counterparties
with whom, for whatever reason, they would be unwilling to do
business. Dealers must not seek or accept favors from the broker for
switching names.

b. Brokerage Cap:

The Treasurer must review the patterns of broker usage from the
brokerage report prepared by Treasury Operations on monthly basis
to ensure there is no undue concentration of business with brokers.

Ø The broker usage is to be monitored separately for Money
Market, FX and Equity product classes.

Ø If the brokerage paid to any broker exceeds X% of the total
brokerage paid for that product during the month, then the

3
Ref. Para-2 of Chapter VI of the Code of Conduct for Treasuries of Banks, DFIs and PDs issued by SBP in
May, 2014.
 concerned desk should discuss appropriate justification with the
Global Treasurer.

Ø The Market Risk Management (TMO) is directed to monitor the
patterns of broker usage on quarterly basis and be alert to
possible undue concentrations of business. If the brokerage paid
to any broker exceeds Y% of the total brokerage paid for that
product, then the same must be reported to ALCO where it are
to be discussed and recorded with rationale and further
instructions of ALCO, if any, are to be complied.

c. Accreditation Criteria of FMAP for Interbank Brokers
(approved by SBP):

Broker must be:
Ø a Corporate Entity, registered with SECP either in the shape of
Private Limited Co. or Public Limited Co. and member accredited
by FMAP.
Ø All Brokerage Entities should have a National Tax Number (NTN).
Ø The Financial viability of the Brokerage Entity would be
determined in terms of Paid-up Capital (net of Losses, if any).
The criteria would be determined based on the proposed
activities carried out by the entity in addition to its already
existing business & Capital Adequacy requirements by
respective authorities;

- FX or Money Market PKR 7,500,000/-
- FX & Money Market PKR 10,000,000/-
- FX, MM & Derivatives PKR 20,000,000/-

• At the time of application, the applicant must produce the
evidence of minimum 25% of the Paid-up Capital requirement
to show the seriousness of the applicant.

 • The FMA must be satisfied that the company presently has, and
will if it is approved continue to maintain, adequate
computerized Accounting Systems prescribing to International
Accounting Standards, as applicable in Pakistan. The system
should also have capability for deal confirmations and adequate
systems of control.



d. Deals Using a ‘Connected Broker’:

Complete disclosure is necessary where there is a shareholding or
material connection between the broker and one of the principals.
In order to avoid any potential conflict of interest and safeguard the
independence of the broker/ dealer, it is important that all the
relevant information is disclosed and that the principals are fully
aware of the situation.

The Bank must solicit information from all the front office personnel
whether any of their close relatives are working in Treasury of any
Bank/DFI/PD or any one of FMAP accredited Foreign Exchange or
Money Market interbank brokerage houses. Global Compliance of the
Bank will collect this information and will share the same with SBP in
January & July every year.

Close relatives include spouse, parents and parents-in-law, sons and
daughters, brothers and sisters, brothers-in-law and sisters-in-law,
niece and nephew, uncle and aunt and cousins.

Wherever applicable/relevant, the word “step” is required to also
prefix the relationships mentioned above.


 e. Differences with Brokers and use of ‘Points’:

Where a broker quotes a firm or unqualified price in a particular
market or instrument for a specified or market amount and is
subsequently unable to substantiate the quote when a deal is
proposed, the bank proposing the trade is fully entitled to 'hold' or
'stick' the broker to the price quoted. This practice, which should not
be a regular occurrence, is sometimes referred to as 'stuffing' the
broker. This effectively means that the broker must make good the
difference or loss to the proposing bank between the price quoted and
the price at which the business is concluded.

Where these differences arise, the following guidelines for
compensation should apply:

a) Difference should be routinely referred to senior management by
concerned desk in Treasury for resolution, thereby changing the
dispute from an individual trader/broker issue to an inter-
institutional issue.
b) Concerned desk in Treasury is responsible to agree and document
the difference amount to be settled with the broker.
c) Once the difference is agreed and documented as mentioned
above, Treasury Operations must settle the amount with broker
and maintain record for future reference. The settlement should
take the form of a bank cheque / banker’s cheque / RTGS in the
name of institution or adjustment to the brokerage bill.
d) Follow-up of any unsettled amount or resolution of dispute to be
dealt by concerned desk of Treasury, as and when referred by
Treasury Operations.




 19. CODE OF ETHICS & CODE OF CONDUCT:

a. All employees of the bank are required to adhere to:

Ø the Bank’s “Code of Ethics & Business Conduct”.

Ø The Treasury staff are also required to comply with the
instructions contained in the “Code of Conduct for Treasuries”
issued by the State Bank of Pakistan and as amended from time
to time by the State Bank of Pakistan, which forms an integral
part of this Treasury Investment Policy document.

Ø An undertaking of reading & understanding the provisions of the
‘Code of Conduct’ for Treasuries are to be taken from all the
existing staff and newly inducted staff and are to be kept by the
respective Treasury Front Office, Treasury Middle Office and
Treasury Operations (Treasury Back Office) in their records for
audit trail. As specified by the State Bank of Pakistan, the staff
will include Dealers, Desk Heads and Assistant/Deputy
Treasurers and officials involved in conducting, authorizing and
settlement of transactions of all product classes.

Ø The undertaking is to be obtained in the following manner,
specified by the State Bank of Pakistan:

“I hereby confirm that I have read and understood the “Code of

Conduct” for the Treasuries of Banks, DFIs and PDs issued by State
Bank of Pakistan vide DMMD Circular no.08 of 2014 dated May 28,
2014 and I hereby agree to comply with the instructions contained
therein and as amended from time to time by the State Bank of
Pakistan.”
 Ø As required by the State Bank of Pakistan, the Risk Management
and Compliance will submit a quarterly report to ALCO
confirming compliance to the ‘Code of Conduct’, which are to be
discussed and documented along with all exceptions and
breaches.
b. Entertainment, Gifts and Favors:
Ø Management or employees must neither offer inducements to
conduct business, nor solicit them from personnel of other
institutions.

Ø Dealers are not permitted to offer or accept gifts,
entertainment, or other favors/inducements from existing or
prospective customers of the Bank or suppliers/service provider.
Employees are prohibited from soliciting or accepting anything
of value from anyone in connection with the business of the
Bank.


Ø In cases where refusing the gift/entertainment might cause
offence, or returning it is simply impossible, the received
gift/entertainment must be reported in writing within three
working days to the immediate supervisor. All dealing staff are
required to abide by the instructions and surrender any gift/
entertainment so received at the Treasurer’s Secretariat for
recording in the Gift Register and submission of the
gift/entertainment to the Bank’s Gift Committee.

Ø Dealers should notify management when they are offered
unusual favors.

Ø Gifts and entertainment that may be offered in the normal
course of business should be limited to the bank’s giveaways
 provided by the Marketing Department for customers and
entertainment should not be excessive in value or frequency.
c. Fraud

Treasury is not allowed to deal in transactions where the beneficiary
is a third party or other than transaction counterparty. However,
exceptions are allowed only in following scenarios:

• Transactions are being conducted on behalf of overseas
branches / centers / representative offices / associates.

In the event of any suspicious circumstances staff must notify
management without delay.
d. Dealing For Personal Account:

All employees must comply with the requirements of:
Ø the Bank’s “Code of Ethics & Business Conduct”,
Ø the “Policy on Prohibition of Insider Trading”
Ø the “Code of Conduct for Treasuries issued by the State Bank of
Pakistan” and as amended from time to time.
Ø Employees are prohibited from dealing through personal
accounts to ensure prevention of abuse or insider trading in any
form. In case of exception (if any) allowed by the Treasurer, such
transaction should be carried out with full disclosure. Detailed
procedure in this regard is covered under the Prohibition of
Insider Trading and Code of Conduct of the Bank.
e. Market Conduct:

All Dealers must observe proper standards of market conduct at all
times.
Ø Dealers should exercise skill, care and diligence, and act in good
faith.
 Ø Dealers must not engage in manipulative or deceptive conduct
or enter into any transaction which may arise conflict of interest
situation.
Ø All forms of market misconduct are strictly prohibited.

f. Confidentiality:

Ø Employees are required to maintain confidentiality and secrecy
at all times while in service.
Ø As a professional they are also required to maintain
confidentiality after leaving service of the Bank and not disclose
any critical information.
Ø All employees will ensure adherence to the confidentiality
requirements contained in the Bank’s Code of Ethics & Business
Conduct, and Code of Conduct for Treasuries issued by the State
Bank of Pakistan.
g. Money Laundering & Terrorist Financing:

Ø All employees must follow the AML & CFT policies and rules
regarding anti money laundering contained in the Bank’s Code
of Ethics & Business Conduct.
Ø Where any member of staff has any knowledge or suspicion of
money laundering & Terrorist Financing activities or reasonable
grounds for suspicion, this knowledge or suspicion should be
promptly reported to Compliance through the Treasurer.
h. Prohibition of Insider Trading:

All employees must adhere to the Policy on Prohibition of Insider
Trading & the Code of Conduct for Treasuries of Banks issued by State
Bank of Pakistan.
i. Media Representation:

Treasurer and dealers are not allowed to express their market
professional and/or personal opinion to any print and electronic
media, seminars, public forums etc. without the prior approval of the
President & CEO of the Bank.
j. Close Relatives of Dealing Staff:

Close relatives of the dealing staff are not allowed to work in the
Treasury dealing room including Market Risk Management (TMO) and
Back Offices.
20. IMPLEMENTATION OF TREASURY INVESTMENT POLICY:
a. Distribution

The policy are to be issued to the management, to be communicated
to appropriate persons responsible for implementation. All bank
employees receiving the document are expected to maintain
complete confidentiality over its contents.
b. Responsibilities

The primary responsibility for overseeing implementation of the
policies within this document rests with Global ALCO. The Board is
required to oversee implementation of the policies through sub-
committee on risk management (BRMC).

To support the implementation of the policies stated in this
document, all employees are expected to demonstrate the highest
standards of ethics in undertaking their work responsibilities in
connection with the policies in this document. The employees are
expected to observe the following:

• Honesty, transparency and openness in undertaking all work
duties.
• Avoiding situations which may place the employee or bank in a
situation of a conflict of interest.
• Not engaging in prohibited business practices, using ‘insider’
information for trading purposes, or activities in breach of
regulations.
• Integrity in independent use of all bank resources.
• Responsibility and accountability in all decisions made.
c. Policy Document Review

TIP document must be reviewed after every X years or earlier by
Treasury and updated where appropriate with inclusion of inputs from
stakeholders viz. Treasury, Treasury Operations and Risk
Management. Following the clearance by Global Compliance and
concurrence by ALCO it will be presented to the Board Risk
Management Committee (BRMC)/Board of Directors (BOD) for
approval.
d. Interim Amendment

In case of any significant interim amendment, ALCO besides all
stakeholders including Global Compliance will give the concurrence.
Finally, it will be approved by the BRMC/BOD.