Treasury Customer Desk, Typical market risks of bank's clients, Treasury Sales Products, Hedging and hedge strategiesBack to chapter
Interest rate fluctuations, foreign exchange rates, and commodity prices on world markets require the experience of Treasury professionals. A bank’s Treasury manages the risk positions of the bank and implements trades on financial markets. Additionally, it provides Treasury services to its clients, especially financial institutions and larger firms, and if necessary, even to medium and smaller enterprises and individuals. This part of the bank’s Treasury is called Treasury Sales, or even the Customer Desk, Sales Desk, or Corporate Treasury.
The main tasks and functions of a Treasury Sales Desk in a standard commercial bank are:
Typical counterparties of a bank’s Treasury Sales Desk are financial institutions and corporations, which often have their own Corporate Treasury department. Banks try to meet clients’ needs, including those in the Treasury Department, and to provide them with the best possible service. Corporate Treasuries in institutions and firms have evolved with the growth of financial markets. The purpose of the Corporate Treasury is to keep financial risks under control and in line with the agreed-upon risk policy of the firm. A typical Corporate Treasury is in charge of the following areas:
The Treasury Sales Desk in a universal bank partners with financial institutions and corporations to conduct business in several of these areas, in particular in the management of cash-flow, liquidity, and market risks. Investment banks are also partners in managing capital structure.
Treasury Sales Departments in banks offer their clients a wide range of products that the Corporate Treasury can use to manage their financial risks. Treasury Sales products can be divided similarly to financial market instruments, i.e.:
In addition to financial market products, the Treasury Sales can also offer some related services, e.g. consulting and hedging strategies, information services on financial markets, and some others.
The Money Market is a market with short-term instruments and interest rates; the maturity of products is usually within 12 months. Interest rates on the money market are expressed on an annual basis (p.a. = per annum) to allow comparison between the different maturities.
For the Treasury Sales, the basic money market product is a deposit. Bank clients can use this cash tool to place their unused resources in banks at individual interest rates that reflect the situation on international markets. In the event of a lack of liquidity on the interbank market, bank clients will usually receive higher interest rates than on normal deposit products, conversely, when experiencing a surplus of liquidity, banks are reluctant to provide such enticing interest rates. In addition to the individual interest rate, clients can obtain additional benefits through the Treasury Sales such as individual maturity for a period that meets their own needs.
Other cash-based money market instruments for Treasury Sales are:
For proper understanding of money market cash instruments, know the established conventions is necessary:
I = V x IR x (D/B)