8of9’s Regulatory Executive Education Program ensures that 8of9 project managers to have a front-to-back understanding of a bank and all of its functions and departments. Given the importance and difficulty of Recovery and Resolution planning, 8of9 brought in a Treasury expert to speak with us.

The Treasury department of a bank is responsible for balancing and managing the daily cash flow to and from the variety of departments within the bank. The department also handles the bank’s investments, assets, and liabilities. Ultimately, the key responsibility for the Treasury department is liquidity management. Treasury must ensure that the bank has adequate funds to continue its activities in all circumstances, particularly in stressed scenarios. In order to be successful in this area, the Treasury department must monitor, manage and report the bank’s liquidity position. This includes both defining a liquidity profile and reporting.

In order to define a liquidity profile, the Treasury department must continually assess several critical factors such as the amount of a liquidity buffer to maintain, the mix of short-term vs. long-term debt, whether that debt is at a fixed rate or a floating rate, and whether certain deals involve a mix of different currencies. In order to meet reporting requirements, Treasury must monitor certain information that is required by regulation including contractual and contingent liabilities, the amount of cash on hand, and the amount unencumbered liquid assets.

The speaker explained to us that the difference between liquidity and funding is that liquidity is the governance framework of the bank’s funds whereas funding is the execution of that framework. Treasury’s key task in funding is to execute funding transactions at the lowest cost. This involves developing a funding plan, which requires an understanding of the available funding opportunities in both unsecured and secured markets. Unsecured funding tends to come from deposits (both retail and institutional banking), interbank borrowings, commercial paper and medium term notes, long-term debt (senior and capital notes), funded swaps, and intraday and overnight loans from clearing banks. Secured funding can be found in repurchase agreements, securities lending and secured bonds.

Treasury is also responsible for ensuring that regulatory and business capital requirements are met. With respect to the regulatory capital requirements, Treasury has to ensure capital buffers are maintained for the Financial Stability Board’s total loss-absorbent capacity (“TLAC”) and stress testing for CCAR. For a bank’s capital structure, Treasury must ensure that a capital structure and capital actions are in place.

Overall, our discussion of the Treasury department’s role at a bank was a valuable experience. We learned how essential the Treasury department of the bank is to daily operations. The discussion also highlighted how important regulatory change management is to Treasury.  Much like project management, the success of Treasury depends on planning and execution.


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