Short Suggestions for Treasury Management In Financial Institutions (TMFI)

Short Notes:
❖ Asset liability Management** ❖ Leverage Ratio*
❖ Risk Management* ❖ Advance Deposit Ratio (ADR)***
❖ Transfer Pricing*** ❖ ALCO Paper***
❖ Capital Adequacy*** ❖ Recurring Deposit*
❖ Money Market vs. Capital Market*** ❖ Junk Bond*
❖ Certificate of Deposits* ❖ Coupon vs. Zero Coupon Bond**
❖ Commercial Paper* ❖ Bond Market in Bangladesh*
❖ Treasury bill Vs. Treasury Bond* ❖ Current Yield
❖ Balance of Payment** ❖ Bond Pricing and YTM***
❖ Quasi Money* ❖ Primary vs. Secondary Market*
❖ Macroeconomic Equilibrium ❖ OTC Market**
❖ CRR vs. SLR*** ❖ Interest Rate Swap
❖ Repo vs. Reverse Repo* ❖ Hedging vs. Speculation**
❖ SWAP* ❖ Fixed Income Securities***
❖ Payment System ❖ Bank for International Settlement***
❖ Demand for Money ❖ Plastic Money**
❖ Foreign Exchange ❖ Stress Testing***
❖ Spot vs. Forward Market* ❖ Crypto Currency***
❖ Future vs. Forward Market* ❖ Sukuk***
❖ B.C. Rate vs. TT Clean Rate* ❖ Interest Rate Risk
❖ LIBOR vs. DIBOR*** ❖ Credit Risk***
❖ Direct vs. Indirect Quotation** ❖ Credit Crunch***
❖ Counterparty Risk* ❖ Basel III***
❖ Translation Risk* ❖ Liquidity Risk**
❖ Bear vs. Bull Market* ❖ Nostro Account Reconciliation***
❖ Secured Overnight Financing Rate ❖ Net Open Position***
(SOFR)*** ❖ Call Money Market***
❖ Liquidity Coverage Ratio (LCR)*** ❖ CAMELS Rating***
❖ Net Stable Funding Ratio (NSFR)***

Descriptive Questions:
1. Define Treasury Management. Describe the various functions of a treasury management
or treasury department of an organization. What types of challenges are bank’s treasury
departments facing in the current economic situation of Bangladesh? ***
2. What is integrated treasury? Describe about the nature and benefits of integrated
treasury.*
3. Define and distinguish between money market and FX market. What are the common
types of money market instruments? Discuss briefly. ***
4. Describe the asset liability management tools of a bank. What are the advantages and
disadvantages of asset liability management? Briefly describe the types of bank liabilities
with examples. ***

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5. Define and distinguish between CRR and SLR. Why and how are CRR and SLR
maintained? Please mention the components of CRR and SLR. ***
6. Why interest rate for repurchase agreement (Repo) is higher than that of reverse repo?
Define and distinguish between operational Reserve and statutory Reserve. Elaborately
explain their importance and implications. **
7. Explain the quotes and Conventions used in the foreign exchange market trading
activities. Define and distinguish between forward and future contracts. ***
8. Define exchange rate. What are the reasons for exchange rate fluctuations? **
9. What are the types of foreign exchange risks? Explain with examples. Discuss the foreign
exchange risk management process of an Authorized dealer. ***
10. What does ALCO stand for? Discuss the broader roles and responsibilities of ALCO.
Describe the basic ALM functions and major responsibilities of Asset Liability
Management Committee (ALCO). ***
11. Briefly explain the following terms: ***
I. Foreign exchange position of a bank
II. Net open position in foreign exchange
III. Net overnight open position
12. Define LCR and NSFR. Explain these with example. ***
13. Explain the two concepts of fund management and liquidity management with example.
Why liquidity management is important to manage the liquidity efficiently? **
14. Define derivatives. ‘The use of derivatives makes fund management easier.’-Explain.
Also describe the dangers (risks) inherent in the trading of derivatives. ***
15. What are the types of derivatives? Differentiate Between future contract and forward
contract. ***
16. Define the term Swap. Describe the various types of Swaps. **
17. Define Stress Testing. Describe the scope and techniques of stress testing. ***
18. What are the key features of a fixed Income Security? Briefly describe the types of fixed
income Securities. Also mention the pros and cons of fixed income Securities. ***
19. What is bond? Differentiate between conventional bond and Sukuk. What are the steps
required to be taken to develop the bond market in Bangladesh? ***
20. What are the money market and capital market instruments in Bangladesh? Give brief
description of them. Differentiate between capital market and money market. ***
21. Explain with example the reasons for difference between spot and forward rates of
foreign exchange.
22. Define primary dealers (PD) and their objectives. Also state the roles and responsibilities
of a PD. **

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 23. Why is proper treasury management important for RTGS participation? ***
24. What are the reasons for Dollar crisis in Bangladesh in recent time? What steps have
been taken by the Government and Bangladesh Bank to mitigate the crisis of Dollar? Do
you agree with the decision of letting the price of USD to be determined by the market
force? ***
25. “Liquidity management is a dilemma for the Treasury Manager of a bank.” –Explain.
What are the liquidity management strategies? Give brief description of each of them. **
26. “Forex Reserve and Treasury Management Department of Bangladesh Bank play a vital
role in treasury management of the government.”-Please explain with details. *
27. What is credit risk? Discuss the strategies that can be used by a bank to mitigate credit
risk. Write down the risks of back office with some mitigation tools. ***
28. Bond prices and the market interest rates are inversely related.” –Explain the statement.
Also explain the factors that affect bond prices. **
29. Briefly explain the risk analysis and risk management/mitigation process. **
30. What is Basel III? Write down the Principles of Basel III. ***

Mathematical Problem Practices:

1. What in inflation rate? If the CPI were 300 in 2021 and 315 in 2022, what would be the
inflation rate for 2022?

2. What is zero Coupon Bond? Assume the following information for an existing bond for
selling. Also assume it is a zero coupon Bond.
• Par Value of the Bond is BDT. 100,000
• Maturity period is 4 years
• Required rate of return is 12%
At what price you would be willing to buy the bond?
3. Suppose a Bond of TK. 1,000 with the maturity of 5 years, 10% Coupon and the yield to
maturity (YTM) is 8%. Calculate-
I. The market value of the Bond
II. Duration of the Bond
4. A Bond is currently sold at Tk. 1060 and of a 9% Coupon interest rate and par value of Tk.
1,000, pays interest annually and has 10 years of maturity. Calculate Yield to Maturity (YTM).
5. What is duration? Calculate the duration of a 5 Year Eurobond with 8% Coupon and 12%
Yield to maturity.
Prepared by:
Md. Abdus Salam Sheikh
Assistant Director, Foreign Exchange Policy Department
Bangladesh Bank, Head Office, Motijheel, Dhaka.
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