Theory and practice of Forex and treasury management

Theory and practice of Forex and treasury management (Module 1 +2)

Category: Forex

Author: The Institute of Chartered Accountants of India

Language: English

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Contents- Theory and practice of Forex and treasury management

Module 1

1. Treasury – Organisational Structure

Treasury – Its Evolution and Objectives
Organisation Structure of Treasury – Front, Back & Mid Office
Functions of Treasury Department
Role of Treasury and Treasurer in:
Responsiblities of a Treasurer
Intergrated Treasury Management – Cost Centre and Profit Centre

2. Treasury – Process

Treasury Management – Systems and Techniques.
Treasury Policy and Procedure Manual.
Delegation with Accountability
Control and Reporting Requirements.
Dealing and Trading Operations – Control and Orderly Conduct, Moral and Ethical Codes, Checks of Balances, Sigining Ethical Code Agreement.
An insight into

Benchmark Rates for Discounting Cash Flows.
Liquidity and Cash Flow Management – CRR.
Treasury Management Processes like Domestic Remittances, International Remittances.
Payment & Settlement Systems, CCIL, CLS and RTGS, NEFT, SWIFT.
Dealing Room Operations: Nostro / Vostro/ Loro & Mirror A/cs – Open Currency Position / Cash Position by Dealers.

3. Treasury – Domestic
Classification of Treasury Market
Money Market
Money Market Instruments
Capital Markets
Bond Market – Types and its Futures
Understanding Current Yields, YTM, Changes in Yields, Different Maturities of Treasury Bonds, Revaluation – Mark to Market and Profit Calculations, VaR (Value at Risk).
Negative list of investments.
Guidelines on Non-performing investments.
Commodity Market

4. Treasury – Forex

Foreign Exchange Markets

Forex Concepts

International Treasury

External Commercial Borrowings (ECBs)

International Funding Organisations

Derivative Markets

Practical Concepts of Options Market

Black Scholes and Beyond – In Options.
Settlement of Futures / Option Contract.
Swaps Market

Hedge Accounting.
Standard International Agreements

5. Treasury – Mathematics

YTM – Yield Curve, Modified YTM, Current Yield, Different Versions – Callable Bonds, Callable Yield Notes, Puttable Bonds.
Building ZCC and and Use of ZCC Yields.
Bootstrapping Process to derive the Zero Curve.
Liquidity & Interest Rate Sensitivity Gap measures – RBI Guidelines.
Bond & Securities Valuation – Bond Dynamics – Duration – Modified Duration.
Risk Measures – VaR – Mecaulay Duration.
Back Testing of VaR
Investment Appraisals.
Financial Statement Analysis

6. Treasury – Technology
Role of Information Technology in Treasury Management.
Overview of Software used in Treasury – Banks, Insurance Companies and Corporates.
Storage of Data Files – Reports Generation, IT Risks Mitigation Measures like Business Continuity Plan (BCP), Disaster Recovery Plan (DRP) and Transaction Protections etc.
Bloomberg / Thomson Reuters screenshot showing Forward Markets and their
Interpretation. FX Swap Curve across the globe and Indian and Correlation between Swap Curves.

Module 2

7. Treasury – Accounting
Integrated Treasury Accounting Units.
Accounting – Valuation and Elimination of Exposures.
Accounting of Treasury Instruments.
Management of Daily, Weekly and Monthly Liquidity / Funding Plans and
Coordinating Plans with Treasury Dealer.
Administration – Bank Cash Management System.
Group Cash Flow Forecasting.
Daily, Weekly and Monthly Treasury MIS to Stakeholders.
Monthly Bank Reconciliation.
Treasury Control and Hedge Accounting

8. Treasury – Taxation
Tax on Derivatives.
Financial Transaction Tax.
Banking Services Tax.
Other Taxes applicable to Treasury Operations (Domestic and Forex).

9. Treasury – Types
Treasury – Manufacturing and Service Corporates

Treasury – Banking

Treasury – Special Reference

10 Treasury – Risk Management
Risk – Definition.
 Treasury Risk Management Policy.
 Role of Mid Office
 System Audit – Risk Management / Mitigations.
 Approach to Forex Risk Management Policy.
 Risk Hedging Instruments & its Mechanism.
 Credit Rating Agencies.
 Asset Liability Management.
 Viability and Risk of using different Hedging Instruments.
 Implications and Challenges of Basel III.
 International Swaps and Derivatives Association Master Agreement:

11. Treasury – Regulation, Supervision and Compliance
 Treasury Management – Ethics and Compliance.
 Prevention of Money Laundering Act, 2002.
 Money Market Operations.
 Banking Regulations
 Intraday Liquidity Management Guidelines issued by RBI.
 RBI Guidelines on Risk Management.
 Regulatory Guidelines on Futures, Options, Forward and Swaps.
 Recent Policy Guidelines of RBI on Basel III implementation.
 Statutory Returns to Reserve Bank of India (RBI).
 Overview of Regulatory Requirements SEBI (ICDR) Regulations, 2009.
 Latest Foreign Direct Investment Policy.
 Foreign Exchange Management Act, 1999.
 Disclosures in Banks Balance Sheet on Treasury.
 FEDAI Guidelines for Merchant Quotes.
 RBI Guidelines on Internal Control.

12. Treasury – Auditing
 Internal Audit and External Audit.
 Internal Audit of Treasury
 Treasury Operations – Systems Audit.
 Documentation & Internal Audit
 Audit of Regulatory Compliance in particular Foreign Exchange Risk Management.
 New Norms in Internal Audit or COSO (Committee of Sponsoring Organizations).
 Compliance Guidelines with regard to Investments of Banks.
 Issues in Management of Integrated Treasury.
 Co-ordination: Internal and External Treasury Audit.

About the author

The Institute of Chartered Accountants of India

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