What is a Bank Treasury?

What Is a Bank Treasury

Banks help their customers manage their money, but who manages bank treasury? How does the bank decide where to invest its capital in all of its businesses and how much to keep in reserve? How does the bank ensure that each of its businesses has enough cash to serve its clients and operate efficiently while having enough cash at all times to cover unexpected market developments? Knowing how the bank’s finance department works today can answer these questions.

The main function of the treasury is to manage funds if needed and distribute excess funds profitably. However, the treasury departments of modern banks act as independent profit centers and are therefore involved in the business of raising funds by issuing multiple liabilities and investing in them using different asset positions.

The balance sheet of a modern bank includes on the one hand the assets and liabilities of the treasury department and on the other hand the assets and liabilities of the non treasury department. When a certain asset or liability is created through transactions on the interbank market and can be negotiated or sold on the market, it generally becomes part of the bank’s portfolio.

If a bank borrows money from the money market or bond market, it is said to be the responsibility of the state, while deposits in the form of demand deposits, savings, and deposits from customers are not obligations of government bonds, because they are not created by market credit.

Bank Treasury

Bank treasury is part of the investment banking business (also known as the wholesale or corporate banking business) and other lines of business such as mergers and acquisitions, project finance, syndicated lending, and global transaction banking. Without a doubt, the Treasury or the market, is an integral part of the investment bank’s bank structure. This business is based on four main pillars:

This business is based on four main pillars:

  • Technology: Technology is essential for accessing real time information on financial markets. It is also important to develop a system that can be used to calculate the prices of the various products sold and the risks involved. This technology also allows confirmation and correct liquidation of operations. And it’s imperative to comply with current and future regulatory requirements.
  • Products: The treasury department provides clients with risk protection and investment solutions for the simplest to the most complex products (structured products) and for all types of financial assets, typically fixed income, interest rates, stocks and foreign exchange rates, and in several financial institutions, including commodities.
  • Distribution Channels: The ability to offer products to customers at competitive prices when and where they need them.
  • Ability to manage and protect the risks associated with the products sold: As soon as the institution’s creditworthiness is established for each of its customers, these risks are assessed and managed. Technology, knowledge and experience play a key role in this.

What does a Bank treasury do?

Every bank has a finance department. Over the past five years, this department has been at the core of all major financial institutions. One of the main roles of the treasury department is to control and manage bank money (in terms of capital and liquidity) and to ensure that all parts of the bank have easy access to the money they need to run their business. This ensures that the bank is financially secure, stable, and can work effectively to serve its customers.

The treasury department is also responsible for liaison with the bodies that regulate banks and establish regulations for bank capital and liquidity.

In order to ensure that banks can better withstand future market pressures, their capital and liquidity requirements have become areas of increasing concern. The Bank’s Finance Department is working closely on this issue and plays an important role. The function of a Bank treasury is a more challenging and interesting job.

In the past, loans and advances were the main source of bank profits. However, with globalization and economic liberalization, banks face stiff competition and need to find alternative sources of profit. Large banks operate on both domestic and international financial markets for lending and investment purposes.

This is done through the cash department of the bank, the main functions of which are of the following two types:

    • Ensure strict compliance with legal requirements for compliance with the specified cash reserve ratio (CRR) and liquidity ratio (SLR).
    • Manage Bank liquidity by:
      • investing excess resources optimally profitable;
      • collecting additional funds to meet loan needs at optimal costs; and
      • Market and liquidity risk management in Treasury transactions.

The bank’s treasury Department also handles currency and provides “protection” to bank customers against their foreign currency exposure at the expense of their commercial operations, namely exports, imports, remittances, and others. It also offers a variety of hedging products and derivatives to manage interest rate and exchange rate risk for bank customers. Liquidity management and the management of liabilities and assets both in local resources and in foreign currency are also important functions of the treasury.

Different treasury products that banks handle:

Domestic Treasury

a. Internal products:

      • Call / notify for a grant
      • Time Loan / Interbank Time Deposit
      • Investing in payment slips (CDs)
      • Investments in securities
      • Inter Bank participation certificate
      • asset derivative transactions
      • Allocation of funds in reverse repo
      • Investments in various SLR bonds issued or guaranteed by the central / state governments
      • Investments in bonds without SLR
      • personal placement and
      • Investments in floating interest bonds, non-taxable bonds, preferred stock, stocks, listed / unpublished shares, mutual funds, etc.

b. Product liability:

      • Borrow / Cancel Money.
      • Cash Loan Maturity.
      • Receiving funds by issuing a deposit slip (CD).
      • Inter Bank Participation Certificate.
      • Loan repo.
      • Borrowing for refinancing from various financial institutions and national central banks.
      • Merger second layer bonds issued by the bank.

Foreign exchange transactions:

a. Interbank:

      • Buy and sell currencies based on Cash, Tom, Spot and Forward
      • Pass the SWAPS (simultaneous buying and selling of currencies for two different time periods) and
      • Placements, investments and loans in foreign currencies

Protection for various commercial transactions at branches:

These transactions include foreign currency balances before shipment, foreign currency accounts purchased, foreign currency loans, foreign currency balances after delivery, cancellation of import accounts, etc.

This mutual fund also manages foreign currency transactions from the foreign currency loan (FCL) business, the money transfers processed by the branches for their clients.

C. Transactions with derivatives as follows:

      • SWAPS against interest
      • Agreement on introductory courses
      • Futures with interest rates
      • Interest rate options and
      • Currency Options


The automated accounting system has disrupted many traditional treasury activities. Today, the treasury function is increasingly associated with a focus on business objectives and integration into organizational strategy. A finance director is expected to provide information and advice on business strategy to his CFO. This role has shifted from passive to active money management