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190PUBLIC BANK BERHAD Annual Report 2012Resilient AlwaysChairman’s Review – Business Operations ReviewCapital Market OperationsAs a Principal Dealer, Public Bank actively participates in theprimary and secondary market of BNM specified securities.This principal dealership also requires the Bank to play anactive role in the daily BNM money market tenders which isundertaken by the funding desk. In 2012, the volume oftransactions traded by the Bank for specified securitiesaccounted for 8.2% and 5.5% respectively of the total volumetraded in the primary and secondary market respectively.Public Bank actively participates in the swap marketparticularly in the United States Dollar and Hong Kong Dollarswap market to manage its foreign currency cash flowrequirements. Besides engaging in gapping activities togenerate interest income via swap market, market volatilityalso provides arbitrage opportunities for the Bank to generatelow risk returns by arbitraging between the swap and moneymarkets whenever these opportunities arise.The Public Bank Group’s treasury operations remainedfocused on managing the liquidity of the Group to ensurefunding requirements are met. Leveraging on the Group’sstrong PB Brand, marketing efforts were intensified toincrease both retail and wholesale customers deposits whichprovide the Group with more stable sources of funds ascompared to funds obtained from the interbank market. Asa result, total wholesale deposits which comprise moneymarket deposits and negotiable instruments of deposits ofthe Group grew by 11.5% to reach RM47.82 billion as atthe end of 2012.In October 2012, BNM approved the centralisation of PublicInvestment Bank’s treasury operations within Public Bank’streasury unit. With this, the treasury operations of PublicBank, Public Islamic Bank and Public Investment Bank,which form the Public Bank Group’s domestic treasuryoperations are now centralised within Public Bank.Centralising the three entities’ treasury operations will resultin more effective monitoring of the Group’s liquidity andfunding requirements and the adoption of more consistentstrategies across the entities to meet the Group’s objectivesand comply with regulatory requirements.ProspectsFinancial markets worldwide are expected to experiencesporadic periods of uncertainty stemming from the ongoingEuropean debt crisis. Under such operating conditions, oneof the main challenges is to sustain growth in treasury’s corebusiness of providing foreign exchange services. The PublicBank Group will leverage on its extensive network of branchesand resources as well as close rapport with customers builtover the years, coupled with intensified marketing efforts togrow its foreign exchange business. The Group will alsocontinue to focus on maintaining a liquid balance sheet byproactively building up its core customer deposits base andinvesting in high grade liquefiable securities.