Treasury Management for Building Societies

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Treasury Management for Building Societies, (Two Days)

This workshop is about building society treasury management. It explains the key terms, the role of treasury, the products used, the regulatory climate (including PS09/16, Strengthening Liquidity and PS10/5, the new sourcebook), the risks, risk management and governance.

You do not need prior knowledge, the explanations are straight forward and include practical exercises. The course is suitable for anyone who needs to know more about treasury. This includes NEDs, senior managers, those in operations, finance and audit and those who are new to dealing and risk.

Below is a summary of the workshop content. Each day has been placed in a logical sequence and addresses the things you need to know.

Day One

Key issues in financial markets today

Regulation/Risk/Governance
The affect on building societies

Key terms that are used in treasury: An explanation of essential terminology and definitions.

The role of treasury: What the Treasury does & the regulatory framework of PS 10/5 (the new sourcebook).

The role of treasury
The regulatory restrictions & "approaches"
Reporting structures and segregation
The main roles & responsibilities

Money markets products: How these markets work, how societies use them and the risks involved.

Loans and deposits & certificates of deposit
Treasury bills
Reserve account
Money market funds

Repurchase agreements

How repo transactions work, the documentation and the risks involved.

Liquidity risk: How liquidity risk is identified, measured, mitigated and managed.

The regulatory framework of PS 09/16 (Strengthening liquidity)
Responsibility of the board
Simplified/standard approaches
The "drivers" of liquidity risk
Wholesale and retail funding
Contractual/behavioural risks
The impact of stresses
The buffer requirement
How liquidity is reported
Turnover requirements
Contingency funding plans

The affect on Societies of the new framework

Identifying vulnerability
Cost of liquidity
Funds transfer pricing & retail product pricing

Derivative products

How swaps are used to hedge interest rate risk
How hedging works
Swap pricing & valuation
Documentation
Credit exposures
Collateral management
Contingent liquidity calls

Interest rate options

An explanation of caps, floors and swaptions
Where and how option risk occurs in society balance sheets, (mortgage and savings products)

Day Two

Fixed rate bonds & floating rate notes

What they are and how they work
How they are used by societies as assets and liabilities
The main risks involved (interest rate risk, credit risk and liquidity risk)

Market risk/structural risk - How this arises

Balance sheet mismatches
Changes in the level and shape of the yield curve
The affect on earnings and valuations

Market risk/structural risk - Reporting

Typical risk reports, how they work & their strengths and weaknesses
Static and dynamic gap reporting
Basis point value
Earning at risk
Classification of reserves

Market risk/structural risk - Basis risk

What it is and how it arises
The measurement of basis risk
Managing basis risk

Treasury & credit risk

Credit decisions and committees
How it is measured and monitored
The importance of ratings and the risk they can pose

Treasury operations (back office)

What happens when a transaction is completed
Where the trade goes/what happens to it
The key controls that take place
The operational risks that can arise

Governance & risk limits

The board's responsibility
Improving board reporting packs
How you establish risk appetite
How this translates into risk limits in treasury and examples of limits
The role of ALCO
The role of audit

End of workshop and review

Related Documents

Regulation > Consultation Paper 09/17: A Specialist Sourcebook for Building Societies June 2009

1st August 2009

The general thrust of the CP is that Societies must prove that they have both the management and the systems capable of effectively dealing with the risks they face. This is part of the enhanced supervisory approach now adopted by the FSA. It states that systems and controls must match the level of complexity in a firm's business model. The FSA will adopt a more interventionist approach in order to ensure this is the case. The proposal is that building societies and the regulator will determine whether the risk management policies adopted are appropriate. Where they are not the Society can either simplify its business or improve its risk management. The FSA also intends to limit societies diversifying their business without a full assessment of capital adequacy. The FSA has considered applying similar CP 17 guidance to the banking sector but has decided on account of the "lack of homogeneity" that this would not be practical and in their case a firm-by-firm approach is more appropriate. The CP addresses treasury and lending. It contains five approaches to treasury management, three areas of treasury guidance and three approaches to lending. Consultation closes on 5th September 2009 with implementation due in early 2010 when a new Building Societies Sourcebook (BSOCS) will replace IPRU-BSOC.

Treasury Consulting for Building Societies

6th August 2010

In the current environment building societies are finding it difficult to keep up with the changes that are affecting them. One area that causes concern is treasury. That's because it's a specialist area and regulation has become much more intrusive. A common difficulty faced by societies when dealing with treasury risk is the limited expertise that is available. This is where consulting can help you. It has a number of advantages: