The Treasury Management Academy  can be booked as a full 2-week programme or individual weeks or modules.

Section 1: The Funding Markets and Interest Rate Hedging
Day 1, 2, and 3

Day 1
Module 1: Introduction to program
Module 2: Interest Bearing Funding Products

This module will examine the different products in the market that could be used to fund the bank or the corporate. In the corporate market this could include bank loans and bonds. In the banking market, this could include inter-bank deposits, Commercial Paper, Repo and various bond structures. We will discuss these products - their structure, quoting convention, pricing and use. By the end of the program, participants should have a good understanding of the products to help fund their organisation

Session 1: Yields and Yield Curves
This session will discuss the fundamental aspects of any interest bearing product which are yield conventions and yield curve analysis

• Yield Conventions
  • What are yield conventions: Discount Rate, MMY, BEY
  • Understanding annual day count conventions
  • Using Yield Conventions in marketing Treasury products
• Yield Curves
  • Yield Curve and pricing of debt
  • Risk free yield curve
  • Credit risk pricing and credit spread
  • The par yield curve and pricing loans/bonds
  • The forward yield curve and pricing
  • The zero-coupon yield curve and discounting cash flow to Mark to market

Session 2: Money Markets and Loans
Discussion of key Interbank Money Market Products for funding Financial Institutions and Large Corporates in the conventional and Islamic markets.

• What is the Money Market?
• Money Market Instruments
• Money Market Yield, Bond equivalent Yield, and Discount rate in money markets
• Inter-bank borrowing and placement
  • What is Libor/Euribor and how are they set and used in Money Market?
  • Libor and the pricing of loans
  • Fraud Issues with Libor
• Replacement for Libor and the alternative reference rates
  • • SOFR, SONIA, ESTR etc…
    • Secured versus unsecured rates
    • Overnight rates and interest calculation
    • Compounding of rates for term period
    • Basis swap with Libor
    • Timeline for alternative reference erates
    • Implementing the new rates in treasury and the bank
  • Challenges in Libor Replacement
  • Domestic local Money Market
• The Loan market and Libor/Alternative Reference Rate
• Repurchase Agreement (REPO)
  • What is a Repo agreement?
  • Repo versus Libor borrowing
  • Structuring a Repo and Reverse Repo (for Placement)
  • Pricing of Repo transactions
  • Repo crisis in USD market in 2019?

Session 3: Bond Markets
In this section, we will discuss the different bond markets and bond products. In these discussions we will look at the market size, rating, issuers, investors, structures, accounting, and pricing of different bond markets

• The US Bond Market
• The 144A Market
• The Eurobond (Regulation S) Market
• Traditional Private Placement (Regulation D) Market
• Commercial Paper Market
• Global Bond Issues
• The Bond Issuance Process
• The Sukuk Structure
  • Sukuk Transactions
  • Pricing of Sukuk
  • Secondary market limitations on Sukuk

 
Day 3
Module 3: Interest Rate Risk Hedging
In this module, we will examine the different products that will help the treasury department hedge interest rate risk. This will include discussions on Interest Rate Swaps, caps, collars, floors, and swaptions.

 

Session 4: Interest Rate Swaps
In this section, we will discuss IRS and how the product is used to manage interest rate risk in the conventional and Islamic markets

• Introduction to IRS
• IRS structure, terminology, cash flow, convention and pricing (outright or T+)
• Yield Curve and IRS pricing
• Pricing of IRS and Bloomberg IRSB screen
• Using IRS to hedge Interest rate risk
• Uses of IRS in funding, bond structuring, bond hedging, fixing loans
• Understanding ISDA documentation in Treasury for IRS
  • Master Agreement
  • CSA Schedule and credit support
  • Terms and conditions
  • Netting and Clearing through CCP and reporting of transactions under Basel 3
  • Mark to market and pricing of IRS using Bloomberg screens

Session 5: Caps and Floors
In this section we will examine interest rate options such as caps and floors in the conventional and Islamic markets. We will discuss how they are used to manage interest rate risk in the treasury department. Also, the structuring of zero cost collars and participating caps will also be analysed.

• Introduction to caps and floors: market conventions, pricing convention
• Series of Puts and Calls options on money market
• Options pricing issues: Delta, Gamma, Theta, Vega, Rho
• Pricing Caps and Floors using Bloomberg CCF screens
• Amortizing the premium
• Clients buying options for hedging risk
• Clients selling options to reduce cost or enhance yield
• Structuring Zero cost collars and participating caps using CCF screens
• Uses of caps and floors in Treasury

 

Section 2: Foreign Exchange Derivatives
Day 4 and 5

Day 4
Module 4: Managing Foreign Exchange Risk
In this module, we will discuss the different products that will help the company manage foreign exchange risk. We will examine the foreign exchange products, cross-currency swaps and currency options and discuss how they can help the treasury department manage FX risk.

 

Session 6: Foreign Exchange
In this section we will discuss the hedging of foreign exchange risk with spot and forward FX products. Special attention will be given to Quoting conventions of FX and forward point. We will also discuss how FX swaps are structured and used.

• Introduction to the Foreign Exchange Market
• Market conventions and quoting conventions
• Using the Bloomberg WFX screens and quotation of spot rates
• Calculation and quotations of forward FX rates
• Understanding the FX forward formula
• Using Bloomberg FX forward screens
• Non-deliverable forwards (NDF) and their use
• Introduction to the FX futures market
• OTC versus Exchange traded products in FX forward and futures
• Application of spot and forward products in hedging FX risk
• Structuring and Using FX swaps

Session 7: Cross- Currency Swaps
By the end of this section, participants will understand the structure and use of Cross-Currency Swaps.

• Introduction of CCS
• Cash Flow of a Fixed CCS structure
• Floating to Floating CCS market conventions
• Hedging CCS with money market and FX products
• Fixing Floating rate CCS with Cross-currency interest rate swaps
• Structuring and Using CCS

Session 8: Foreign Exchange Option
By the end of this session, participants will understand the structure, pricing and use of FX options both in the conventional and in the Islamic market.

• Introduction to FX Option
• Puts and Calls in FX Options
• Option convention: what we buy/sell
• Option pricing convention: % spot, % amount, %strike
• Option pricing model
• Using Bloomberg option pricing model
• Client’s buying options as insurance
• Client’s selling options to reduce cost or increase return
• Structuring FX option products
• Range forward and participating caps

 

Section 3: Advance Derivatives and Islamic Treasury
Day 6 and 7

Day 6
Module 5: Advanced Treasury Products including Islamic Treasury Structuring
In this section participants will learn about advanced treasury products such as exotic options and structured products to include Islamic Derivative Products. New structures such as credit derivatives, commodity derivatives and Islamic derivatives will also be discussed. By the end of this section, participants will have a good understanding of the structure, use, and pricing of advanced/Islamic derivative and funding products in the trading room.

 

Session 9: Exotic Options
By the end of this section participants will be able to identify, describe, structure, price and use different types of exotic options to help manage financial risks.

• Definition of exotic options
• Understanding digital option structures
  • Digital Option description
  • Pay-out Structures of Digital Options
  • Pricing digital options using Bloomberg screen
  • Using Digital options to structure Contingent Fee Options
  • Using Digital Options to structure No-Touch and Fairway bonds
• Understand time series exotic options
  • What are time series options?
  • Structuring and Pricing average rate options with Bloomberg screen
  • Using Average rate options in FX and Caps
  • Structuring and Pricing Knock-in, Knock-out structures
  • Using Knock-in and knock outs to hedge financial risk
• Understanding basket options structures
  • What are basket options
  • Structuring and Pricing issues with basket options
  • Using basket options to hedge FX risk
• Understanding Quant Options
  • Understanding Quant options
  • Pricing issues in Quant options
  • Using Quant options in structured products

 
Session 10: Credit Derivatives
By the end of this section, participants will be able to identify, structure and use different types of credit default swaps to hedge credit risk of the company and/or the bank

• Definition of Credit Derivatives
• Credit Default Swaps and Total Return Swaps
• Understanding Credit Yield Curve
• Structuring and pricing CDS
• Types of CDS: Put, one fee, single credit, basket
• Delayed start CDS structure
• Pricing of CDS
• Using CDS to manage credit risk of customers for corporates
• Using CDS to manage credit portfolio in banks
• Understanding Total return swaps
• Using TRS for banks and investment firms

Session 11: Commodity Derivatives

• What is commodity derivatives
• Types of Commodity Derivatives
• The commodity prices curve
  • Seasonality
  • Location of delivery
  • Transportation
  • Warehousing
  • Insurance
  • Financing cost
  • Issues in commodity pricing
• Cotango and Backwardisation in Commodity Price curves
• Use the commodity price curve to price
  • Commodity Swaps
  • Commodity Options

 
Day 7
Session 12: Islamic Treasury Products

• Money Market in Islamic Finance
  • Key Islamic Finance issues: Riba, masir, gharar, jahl and riswah
  • Using Murahaba commodity finance structures for interbank lending and borrowing
    • Primary and secondary murahaba structures
    • Restriction on commodities
    • LME Pallladium nd Aluminum contracts
    • Master Tarawug Agreement (MTA) and money markets
    • The bank as the Wakil in a Murabaha
  • Deposits using Wakala Structures with interest
  • Documentation
    • MATP
    • ISDA/IIFM
• Understanding Islamic IRS/PRS:
  • Profit Rate Swap structures
  • Back to Back Murabaha structures
  • Primary and Secondary swaps
  • Cash flow exchanges in PRS
  • Difficulty in Pricing and mark to market
• Structuring Islamic Caps and Floors
  • Wa’ad Structures
  • Wa’ad for a Murabaha funding or deposit
  • How do Wa’ad help manage risk
• Islamic FX spot and forward
  • Structuring Islamic FX forward
  • Murabaha, Dual Wa’ad and FX forward structuring
  • Structuring Islamic FX Swaps with Spot and Murabaha/Dual Wa’ad transactions
• Structuring CCS with Long Term Foreign Currency Murabaha
  • Primary Murabaha
  • Secondary Murabaha
  • Back to back Murabaha structures
• Islamic FX Options
  • Understanding Arbun Structures
  • The bank hedges Currency risk by buying and re-selling to customer
  • Arbun deposit must be included in overall fee
  • Arbun deposit versus the premium and the overall amount of transaction

 

Section 4: Treasury Management for Corporates and Banks
Day 8, 9 and 10

Day 8
Module 6: Managing Corporate Treasury
In this module, we will discuss the best practice and tools to manage corporate treasury. We will review the key roles and responsibilities of corporate treasury and discuss how to use the products of treasury to help fund and manage financial and credit risk of the company. This section will also discuss best practices in cash management and cash flow forecasting in the treasury function. We will also discuss the best treasury organisation for a corporate treasury department depending on its business model and geographic reach.

 

Session 13: Corporate Treasury

• Understanding Corporate Treasury
• Review the role of the CFO and the treasury function
  • Funding
  • Cash management
  • Trade Finance
  • Investment
  • Risk management
  • Bank and Investor relations
  • Managing credit risks of customers
  • PwC Report on key concerns of CFO and Corporate Treasurers
• Review of cash management of the company
  • Collections and payments systrms and products
  • Account Management
  • Pooling, notional pooling sweeping, virtual accounts
• Cash flow and funding forecasting in the company
• Using treasury funding products to finance the operation of the company
  • Cap Ex and Working capital facilities
• Using treasury derivative products to hedge financial risk of the company
• Overall organisation of treasury department
  • Global
  • Regional
  • Local
  • Treasury centres and how they work
• Case Study on the organisation and operations of corporate treasury department

 
Day 9 and 10
Module 7: ALM and Bank Treasury
This module discusses the treasury of the bank and the management of Assets and Liabilities (ALM). In ALM, we will discuss the management of market risk of a financial institution to include the analysis of IRRBB, EaR, EVE etc… We will also discuss the management of liquidity risk in the bank to include the need for a comprehensive liquidity management program. Fund transfer pricing in the Treasury Function to manage funding cost, market risk and liquidity risk will also be discussed. Also, regulations on BIS 3 on IRRBB, LCR, and NSFR to manage market and liquidity risk will also be discussed

 

Session 14: What is Asset-Liability Management?
By the end of this section, participants will understand asset liability risks and the function of ALM in the bank

• What are the ALM risks
• ALM market risk
• ALM liquidity risk
• ALM and making money
• ALM and business strategy of the bank

Session 15: Roles and Responsibilities in ALM
By the end of this session, participants will be able to identify the ALM roles and responsibilities

• BIS 3 and the new roles and responsibilities of BOD
• Business Strategy
• ALCO Strategy
• Capital Allocation
• Market Risk and Liquidity Risk Appetite Policies
• Risk Management Policies and Procedures
• Risk Management Systems, Process and Organisation
• Best Practice: Working with EXCO, ALCO, Risk Management Department/Committee, Treasury, and Audit Department/Committee

Session 16: ALM and Assessing Market Risk
By the end of this session, participants will be able to use the key tools in identifying and assessing market risk on the balance sheet

• Identify and Quantify Market Risk in ALM
• Earnings at Risk
• Net interest income
• Types of interest rate risk
  • Gap
  • Yield curve
  • Duration and Convexity
  • Optionality
  • Basis
• EVE analysis in ALM market risk
  • Mark-to-market and portfolio valuation
• New BIS 4 Regulations on IRRBB
  • IRRBB regulation overview
  • 19 time buckets
  • Treatment of Non Maturity Deposits, Early Pre-payment of Fixed Rate Loans, Early Termination of Fixed Rate Deposits
  • Stress Testing and Scenario analysis
  • Supervisory Policy on EVE
• BOD ALM reporting:
  • Market Risk Gap analysis, EAR report
  • Long Term EVE analysis
• Business Strategy and ALM Market Risk forecast
• Impact of economic and interest rate bank balance sheet

Session 17: ALM and Managing Market Risk
By the end of this session, participants will be able to implement the key tools to manage ALM Market Risk.

• Managing ALM Market Risk
• Limit system
  • Limit reporting and sanctions
  • Tools to Manage ALM Market Risk
• Match Funding
• Interest Rate Swaps
• Foreign Exchange
• Cross- Currency swaps

Session 18: ALM and Managing Liquidity Risk
By the end of this session, participants will be able to identify the key steps in identifying, quantifying and managing liquidity risk in the bank.

• Liquidity Products: Overnight, Libor, repo, etc..
• Diversification and concentration
• ALM ranking of liquidity
• Stability and sustainability of funding sources
• Measurement metrics and monitoring
• Key metrics: Cash forecast, roll-off forecast, liquidity forecast
• Scenario and back testing
• Limits
• Internal funds transfer pricing
• Liquidity Premium
• Setting policy for ALM and FTP
• Liquidity asset buffer
• Choosing appropriate assets and business strategy
• Managing the asset portfolio

Session 19: ALM and BIS 3 New Liquidity Regulations
By the end of this section, participants will be able to identify the new regulations on liquidity risk, namely LCR and NSFR, and their impact on the ALM

• New BIS ratios: Why?
• Liquidity Coverage Ratio
  • Definition
  • High Quality Liquid Assets
  • Levels 1 2A an 2B
  • Limits
  • Calculate Net Stressed Outflow
  • Impact on Banks and ALM
• Net Stable Funding Ratio
  • Definition
  • Calculate Available Stable Funding
  • Calculate Required Stable Funding
  • Impact on ALM

Session 20: ALM and Basel 3 Regulations on Capital Ratios
By the end of this section, the participants will be able to identify the new Basel 3 regulations on bank capital and their impact on the bank’s business and the treasury function

• Improve Bank Capital Base:
  • Quality and Quantity: CET1 4.5% from 2%
  • Capital Conservation Buffer: 2.5% from 0%
  • Countercyclical Buffer: 0% to 2.5% from 0%
• Leverage Ratio 3%
• New Capital regulations and impact on ALM

Session 21: ICAAP and SREP for in ALM
By the end of this section, participants should be able to use best practices in conducting ICAAP and supervisory reviews especially for ALM. FTP analysis will be extensively discussed. Scenario analysis on the reduction of QE and sovereign buy in will be discussed

• How to conduct ICAAP in banks
• ICAAP and stress testing for market and liquidity risks
• Scenario analysis
• Best Practice ICAAP reporting for BOD, supervisors and market disclosure
• SREP for Treasury Products with Pillar 2 add-on
• Supervisory review of capital needs and Pillar 2 add-ons of capital
• ICAAP and RISK Appetite Policies
• The Impact of Regulations on FTP and Bank Profitability
• FTP under the Basel 4 regulations
• Loan Pricing under new market and liquidity risk environment
• Economic Profit, RAROC and capital allocation decisions

Session 22: Final Thoughts and Future Steps on Treasury Management

 

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