ASSIGNMENT
Course Title : Bank Fund Management
Course Code : BNKG-3605
Submitted By —
Name : Sadia Jahan Chowdhury
ID No : EB223247
Semester : 6th
Section :A
Date of Submission : 21/06/2025
Submitted To —
Mohammad Burhan Uddin Khondker
Assignment Topics —
● Purpose and function of treasury department of a commercial bank.
✦ Overview of the Treasury Department ✦
The Treasury Department is like the financial nerve center of a commercial bank. It ensures
that the bank stays liquid, profitable, and protected from financial risks, while complying
with regulations and supporting other departments in financial decision-making.
In Bangladeshi banks, the treasury doesn’t just deal with cash. It also handles investments
in government securities, deals in the interbank money market, manages foreign exchange
transactions, and keeps an eye on financial risks like interest rate or currency fluctuations.
It plays a key role in meeting regulatory requirements too like maintaining CRR and SLR
ratios as instructed by Bangladesh Bank.
✦ Purpose of the Treasury Department-
At its core, the treasury department exists to keep the bank financially sound. Its job is not
just to move money around, but to make smart decisions about liquidity, profitability, and
risk all while staying within the rules set by Bangladesh Bank. The key purposes:
1. Liquidity Management:
The first and most basic purpose is to make sure the bank always has enough cash to meet
withdrawals, loan demands, and daily operations. If a bank runs out of cash even for a day,
it can lose customer trust and face penalties.
● Forecasting daily cash needs
● Managing surplus and shortfall of funds
● Interbank borrowing or lending to adjust liquidity
2. Managing Financial Risk:
Markets are always changing, interest rates go up and down, currencies fluctuate, and
economic shocks happen. The treasury department helps the bank reduce the impact of these
risks.
● Interest rate risk
● Liquidity risk
● Market risk
3. Regulatory Compliance:
In Bangladesh, banks must follow rules set by Bangladesh Bank. The Treasury ensures the
bank meets these requirements smoothly.
● Maintaining CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio)
● Following exposure limits and reporting rules
● Aligning with Basel III standards
4. Profit Optimization:
The Treasury isn’t just about safety it’s also about making money. By investing in
government securities, managing interest rate gaps, and finding low-cost funding sources,
treasury helps the bank improve earnings without taking on excessive risk.
● Investment in T-bills, bonds, repo operations
● Managing cost of funds vs. returns
● Taking advantage of short-term market opportunities
5. Asset-Liability Balancing:
Banks deal with short-term deposits and long-term loans. The Treasury ensures that this
mismatch doesn’t create financial stress.
● Coordinating with ALM (Asset-Liability Management)
● Monitoring mismatches in maturity or interest sensitivity
● Supporting the bank’s overall balance sheet stability
6. Strategic Decision-Making Support:
Treasury also plays a behind-the-scenes role in advising senior management. It provides
data and insight that guide major financial decisions, including pricing of products, loan
growth targets, and investment planning.
✦ Core Functions of the Treasury Department-
These functions are the practical actions that help manage money, control risks, and meet
regulations. It monitors cash, handles investments, trades currencies, manages interest rates,
and makes sure the bank follows the rules. Each function plays a role in making sure the
bank stays stable and profitable.
In the following parts we’ll look closely at these core functions of what the treasury actually
does to keep the bank’s finances in balance.
1. Cash Flow & Liquidity Management:
This is one of the most routine but essential functions. The Treasury closely monitors inflow
and outflow of funds and takes action if there’s a shortage or excess.
● Monitoring daily cash position
● Managing surplus funds through short-term placements
● Borrowing from or lending to other banks in the call money market
2. Investment Management:
The Treasury invests excess funds to generate returns. In Bangladesh, this usually involves
investing in safe and regulated instruments.
● Buying government securities (T-bills, bonds)
● Participating in repo and reverse repo operations
● Managing short- and long-term investment portfolios
3. Foreign Exchange (FX) Dealing:
For banks with foreign trade clients or remittance business, the treasury handles foreign
currency transactions and rate management.
● Buying and selling foreign currencies
● Managing exchange rate risk
● Ensuring compliance with central bank FX guidelines
4. Interest Rate Management:
Changes in interest rates affect both the bank’s costs and income. The Treasury tries to
manage this impact smartly.
● Gap analysis for rate-sensitive assets and liabilities
● Using short-term deposits or borrowing to manage interest rate exposure
● Supporting ALCO (Asset Liability Committee) decisions
5. Regulatory Reporting & Reserve Management:
One of the treasury's routine but crucial functions is maintaining and reporting regulatory
reserves.
● Maintaining required CRR and SLR levels with Bangladesh Bank
● Submitting regular liquidity and market risk reports
● Ensuring all regulatory ratios and limits are met daily
6. Interbank Money Market Operations:
The Treasury actively participates in the interbank market to manage short-term needs.
● Borrowing/lending in the overnight or term money market
● Placing or accepting funds from other banks
● Managing the cost of borrowing efficiently
7. Coordination with Other Departments:
The treasury doesn’t work alone. It constantly coordinates with departments like finance,
corporate banking, trade, and risk management to manage funds better.
● Supporting credit disbursement with liquidity planning
● Advising branches on FX or investment-related matters
● Aligning treasury actions with overall bank strategy
8. Back Office & Settlement Activities:
Behind every transaction, there’s a settlement process. The back office ensures deals are
confirmed, settled, and recorded properly.
● Verifying trade confirmations
● Managing payments, receipts, and reporting
● Maintaining deal records and audit trails