Treasury roles

1. Treasury role in international
banking and global scenario
Presented by:
Manish Kumar
MBA – Finance
GJUS&T

6. Payment & Settlement Systems
Clearing Corporation of India Limited (CCIL) is an institution set up to clear outright
and repo trades on a guaranteed basis. Negotiated Deal
Settlement (NDS) is a trading platform while
CCIL is a Clearing House Settling trades. Products handled by CCIL are:
(a)Domestic:
G-Secs / State Governments / T-Bills
Outrights
Repos / CBLOs
RBI Auctions
(b)Forex: USD /INR Spot Cash TOM
Forward
(a)
CCIL

7. CCIL has also introduced a dealing and trading platform for
forex called FX Clear. FX Clear is
a concept similar to operation to the NDS and enables
Straight Trough Processing (STP) once
a deal is concluded. FX Clear enables trading to be done
through Order Matching Mode and
Negotiation Mode. Order Matching Mode automatically
matches the best bids and offers in the
system, while the Negotiation Mode enables deals after
agreement on prices, quantities, etc.,
between the counterparties.

8. (b)
CLS
Continuous Linked Settlement (CLS) plays a fundamental role in the foreign exchange (FX)
market – it operates the largest multicurrency cash settlement system to mitigate
settlement
risk for the FX transactions of its Members and their customers.
Owned by the world's leading financial institutions, CLS settles payment instructions
relating
to underlying FX transactions in 17 major currencies and certain other transactions that
result
in one-way payments in a subset of those currencies.
The FX market is a key component of global economic activity. It is the largest financial
market by value and is integral to global commerce. The reasons for exchanging
currencies
are as diverse as the community which trade them. This community includes central
banks,
commercial banks, small and large corporations and the fund management industry.
All members of the FX community potentially bear the risk of loss of principal due to
settlement risk. Settlement risk, also known as“Herstatt risk,” is widely recognized as the
most significant systemic risk to participants in the FX market, meaning the mitigation of
it is a
high priority for the community as a whole.

10. Dealing Room Operations
(a)Nostro
Nostro accounts are foreign currency accounts maintained with
Correspondent banks to facilitate clearing forex transactions of the bank.
(b)Vostro
Vostro accounts are rupee accounts maintained by banks outside India with
a bank in India to clear and settle their rupee transactions.
(c)Loro
Loro Account is a Current Account Maintained by one Domestic Bank on
behalf of other domestic bank in foreign bank in foreign currency. In other
word Loro Account is a Nostro Account for one bank who opened the bank
and Loro Account for other bank who refers first one account. For Example:
SBI opened Current Account with Swiss bank. If PNB refers that account of
SBI for its correspondence, then it is called Loro Account for PNB and it is
Nostro Account for SBI

11. (d)Mirror A/Cs
Nostro mirror accounts are shadow accounts maintained by the banks
corresponding to the nostro accounts maintained with the correspondent
banks. Transactions in the nostro accounts are replicated in mirror
accounts in exactly the opposite manner, viz.,
(e)Open Currency Position
The sum of the open currency spot position and the open currency
forward position, is the measure of the foreign exchange risk. The open
currency position is the difference between balance assets and liabilities
in foreign currency plus the forward (conditional and unconditional) forex
purchased and sales. The open currency position is the measure of the
foreign exchange risk. The first one is for inquiry purposes and shows
the open currency position per currency. The Head Office provides the
network with separate limits for currency groups and the total open
currency position and therefore two positions are created to assign these
limits. Both positions are the total of all positions in each currency
irrespective of whether the position is positive or negative.

12. (f)Cash Position by Dealers
Cash position by Dealers refers to a broad area of finance involving the
collection, handling and usage of cash. It involves assessing market liquidity,
cash flow and investment. Within the treasury function, cash management is an
activity that clearly benefits from economies of scale and process
reengineering. By centralizing its cash management operations, a corporation
can achieve better management of internal cash flows, reduce its float and
transaction fees, and, of course, pare its operating costs. By standardizing
liquidity management processes, significant improvements can also be obtained
in terms of control and security of cash.
Automatic Cash Management transfers.
These transfers are the very last transactions carried out on the accounts at the
end of the business day. The purpose is to bring the balance on the connected
account to zero, or requested target amount. The bank settles all incoming and
outgoing transactions first and after it executes upstream transfers that sweep
the credit balance to the master account downstream transfers that settle up
negative balance on the connected account.

13. RBI Guidelines on NOP and NOOPL
The Foreign Exchange Exposure Limits of Authorized Dealers would be dual in
nature.
(i)Net Overnight Open Position Limit (NOOPL) for calculation of capital charge on
forex risk
Global scenario in Treasury Management
(ii)Limit for positions involving Rupee as one of the currencies (NOP-INR) for
exchange rate management.
For banks incorporated in India, the exposure limits fixed by the Board should
be the aggregate for all branches including their overseas branches and Off-
shore Banking Units. For foreign banks, the limits will cover only their branches
in India.