Technical Guide on Internal Audit of Treasury ... - CAalley.com

<strong>Technical</strong> <strong>Guide</strong> on Internal Audit of Treasury Function in Banks
are required to report under the following business segments as primary
reporting format and for the purpose of segment reporting under Accounting
Standard (AS) 17, “Segment Reporting”:
(a)
(b)
(c)
(d)
Treasury
Corporate / Wholesale banking
Retail banking and
Other banking operations
“Domestic” and “International” segments will be the geographic segments for
disclosure. Treasury activity in a bank depends on its size, complexity of
operations, area of operations and risk profile.
Integrated Treasury
1.5 Traditionally, the domestic treasury operations were independent of
forex dealings of a bank. The need for an integrated treasury rose in the
backdrop of interest rate deregulations, liberalization of exchange control,
development of forex market and advancement in the settlement systems and
dealing environment. The integrated treasury besides performing the functions of
the traditional roles also performs the following functions:
(a) Reserve management and Investment- This involves meeting Cash Reserve
Ratio (CRR)/Statutory Liquidity Ratio (SLR) obligations and having an
optimum mix of investment portfolio.
(b) Liquidity and Funds management- This involves analysis of major cash
flows; providing inputs to planning group on funding mix( currency, tenor and
cost) and yield expected in credit and investment.
(c) Asset liability management and term money- This involves determining the
optimum size and growth rate of the balance sheet; and also price the
assets and liabilities in accordance with the prescribed guidelines.
(d) Risk Management- This involves managing all market risks associated with
the bank’s assets and liabilities. Risk management also includes
management of credit risks on treasury products and operations risks on
payments and settlements.
(e) Transfer pricing- Ideally , the integrated unit should provide benchmark rates
after assuming market risks to various business groups and product
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