Fund Management In Dept

In order to facilitate flow of funds from/to branches Treasy may have accounts with MCB,ABL,HBL,NBP and most importantly with Central Bank. Accounts maintained with the banks other than Central bank is because of the fact that Central Bank does not have branches in every city. So the requirements of the branches for receiving/remitting funds from/to Treasury where Central Bank branches are not present are fulfilled through remittances with other banks.

Most importantly the Treasury maintains following types of accounts with Central Bank.

1. Current Account: This is for inflow and outflow of funds in local currency such as through clearing, branch remittances, other transactions and lastly for maintenance of Cash Reserve Requirements. A daily statement of this account is received from central Bank and reconciled from the banks's book on daily basis.
2. SGL Account (Subsidiary General Ledger Account): The Banks/Non banks holding SLR and entitled to open current account with Central Bank are allowed to maintain SGL account with Central Bank. The un-certificated bonds/no paper security is handled through this account. This is book bases clearing and settlement system of accounting and hence knows as Subsidiary General Ledger Accounts. This refers to the process of accomplishing settlement via an entry in a book representing the owernership securities of an investor. Securities under this system are de materialized and as such no physical movement of securities is required in case of change of ownership. The transfer of ownership from one owner to another is completed by debiting/crediting the respective accounts. Weekly balance confirmation is in practice for reconciliation purpose.
3. I.P.S Account(Investment Portfolio Securities): The SGL account holders are eligible to maintain with the Central Bank two SGL accounts one for their own position and another for their respective clients' position i.e. I.P.S.accounts. All the transactions between Central Bank and SGL account holders and also those relating to inter dealer shall be recorded by Central Bank and would be reflected in the two SGL accounts separately under own IPS accounts. Weekly balance confirmation is in practice for reconciliation purpose. The banks at their end maintain SGL accounts having their own position and clients position separately.
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Fund Management

The Treasury of the bank receives from and remits funds to branches of the bank. It is also responsible for investment of excess funds in profitable avenues while ensuring the prudent nature of such transactions and also keeping in view the element of rish and liquidity associated with such transactions.

Treasury Setup

The "Treasury" of any bank comprises of the "Front Office(Dealing Room)" and "Back Office(Settlement)". The concept of Middle Office is also being developed with special reference to the risk management. The In-charge treasury and dealers review all reports and discuss them during the day. This included how to cover short position or how to settle long position. the likely rates in the market short/long position of the market. After all this discussion dealing actually starts.

During the day, the dealers carry out transactions either directly or through brokers. Details of the transactions are jotted down and deal tickets are prepared accordingly. The bank office notes the information from the deal ticket and reconciles it with the dealers' limit and counter-party limits and scrutinize the other relevant information.

The back office then arranges to collect/issue Central Bank cheque from/to the counter party. The central bank cheque so collected/issued is credited/debited through our current account maintained with Central Bank followed by due acknowledgement letters.

At the end of the day various reports are generated from the system. Out of these reports some important reports are presented to the management's review. The above process involves proper checking of profit and principal fund both by system as well as by the officers concerned.

Treasury Input

The inputs of commercial banks are deposits from customers. These are the sources of funds (liabilities), which are payable with or without profit on demand or at a specified date. Hence are called the demand and time liabilities of the bank. Out of these total demand and time liabilities, specific percentage amounts are kept towards maintenance of CRR(currently 5%) and SLR(currently 15%) requirements. The CRR is the cash reserve maintained with Central Bank at 0% rate of profit on daily basis. Similarly SLR is the liquid assets to be maintained in the form of liquid cash and government securities namely Federal Investment Bonds, Pakistan Investment Bonds and Market Treasury Bills. The rest of the funds i.e. remaining 80% may be used for lending and other investment purpose.

Treasury Introduction

The Basic functions of treasury include:

1. The Balance Sheet Management
• Statutory Cash Reserve Requirement(SCRR or CRR)
• Statutory Liquidity Reserve requirement(SLR)
• Foreign Exchange Exposure Limit (FEEL)
• Statutory requirements in Investments
• Statutory requirements towards foreign currency deposits
• Other requirements
2. Risk Management
3. Managing/Advising Transfer Pricing
4. Trading