What is treasury management in banks


1. Term: The tasks of treasury or treasury management consist (based on conventional liquidity management in the past) in a comprehensive and integrated asset-liability management for the entire bank balance sheet.

2. features: The contents of treasury include all aspects of conventional liquidity, interest and currency management, as well as comprehensive capital structure management, with the aim of minimizing the cost of capital and optimizing capital allocation, as well as carrying out medium and long-term financial planning. In addition, treasury management includes professional risk management, i.e. above all quantification, recording, management, forecasting and control of interest rate, currency, raw material and credit risks within the meaning of of corporate goals. Organizationally, the treasury tasks are performed centrally or decentrally by a treasury department and as a service center or profit center. See also Treasurer, Treasury Department. Treasury has to record and consolidate all relevant risks of the various business areas of the bank at market values ​​on a daily basis (“marked-to-market” principle). The maximum loss potential, i.e. the value-at-risk (VaR), is determined on the basis of this entire risk position of a bank, which is valued at market values ​​and taking into account the volatilities and correlations between the individual forms of risk.

3. Control instruments: The management of the risks listed above can be divided into active (influencing the risks) and passive (influencing the risk takers) instruments. While the passive control measures are essentially limited to the creation of general risk provisions, limit systems for risk avoidance as well as balance sheet (customer or interbank transactions) and off-balance sheet (derivative financial instruments) control instruments for risk reduction and transfer are available within the framework of the active control instruments. Risk limits are operational specifications based on the respective VaR for carrying out the proprietary trading activities necessary for risk control, e.g. with regard to the instruments used, the respective volume or the use of liquidity. In addition, by specifying balance sheet structure indicators, possible effects on the income statement (P&L) and the balance sheet can be taken into account and thus limited.