This lesson establishes the foundational structure of the international financial system and the monetary frameworks within which treasury operations function.

1.1 The International Monetary System
The international monetary system is the framework of rules and institutions that governs exchange rates, international payments, and capital flows between countries. Understanding its evolution from the Gold Standard and Bretton Woods to the post-1973 floating exchange rate system is essential for treasury professionals .

1.2 Balance of Payments (BOP)
The balance of payments is a systematic record of all economic transactions between a country and the rest of the world. The BOP consists of the current account (trade in goods and services), the capital account (cross-border investment flows), and the financial account (central bank reserves and other financial transactions). Treasury professionals must understand how BOP dynamics influence exchange rates and impact the financial position of multinational organisations .

1.3 The Role of Central Banks
Central banks influence exchange rates and interest rates through monetary policy tools, including open market operations, discount window lending, and reserve requirements . They also manage foreign exchange reserves and may intervene in currency markets to stabilise their domestic currency .