Learning Objectives:

  • Explain the role and functions of the treasury department.

  • Apply treasury governance and control principles.

  • Understand the role of the Bank of England and other central banks.

7.1 The Role of Treasury

The treasury department is responsible for managing the bank’s cash, liquidity, funding, and financial risks. The University of Birmingham module covers the “structure, organisation, operations and functions of a treasury department” . Key functions include:

  • Cash and Liquidity Management: Forecasting cash flows and managing liquidity.

  • Funding Management: Securing appropriate funding for the bank’s operations.

  • Risk Management: Managing interest rate, foreign exchange, and liquidity risks.

  • Bank Relationship Management: Managing relationships with correspondent banks.

7.2 Treasury Governance

The University of Birmingham module covers “treasury policy, objectives, corporate governance, controls, ethics and reporting” . Key governance elements include:

  • Treasury Policy: A formal document outlining the bank’s approach to treasury activities.

  • Risk Limits: Quantitative limits on risk exposures.

  • Segregation of Duties: Separation of front, middle, and back office functions.

  • Reporting: Regular reporting to the board and ALCO.

7.3 The Role of Central Banks

The University of Birmingham module covers “the roles of central banks, commercial banks, investment banks and non-bank financial institutions in financial markets” . The BSA course covers “Bank of England facilities” . Central banks play a key role in:

  • Monetary Policy: Setting interest rates and managing the money supply.

  • Lender of Last Resort: Providing emergency liquidity to banks in times of stress.

  • Regulation: Supervising banks and ensuring compliance with regulations.

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