‘Treasury operations vital for commercial banks’ success’

Ramani KANGARAARACHCHI

The development of a vibrant and efficient money and foreign exchange market and a deeper and more liquid secondary bond market would enhance the competitiveness and dynamism of the entire economy. Therefore treasury operations today has become a very important and challenging business activity for commercial banks due to several reasons.

Deputy Governor Central Bank B D W A Silva expressed these sentiments in his speech ‘Treasury and Foreign Exchange Operations' at the inauguration of the five day international seminar at the Centre for Banking Studies Rajagiriya on Monday.

Elaborating on these reasons he said firstly, the world economy is recovering slowly after the crisis but high prices of oil and other commodities is a threat to global growth. Secondly, International financial markets are fragile and concerns in the Euro area including risks arising from high public debt have not yet diminished. In spite of these developments, world trade has been forecasted to have grown by 6.5 % in 2011. In 2012, the growth is expected to be in the same range given slower world economic growth of 3.25 % in 2012,he said.

Also foreign direct investment and remittances have been growing. Many countries have liberalised a large number of capital market transactions allowing domestic entities to borrow from international markets. Hence, the volumes of cross-border capital movement have been increasing. Global foreign exchange market turn over is huge and it is nearing US $ 4 trillion. Of which, the Asia and Pacific share is one fourth. Therefore forex dealings have become a truly challenging profession, and there are new risks with new sanctions.

He said risks can be posed by non-availability or restrictions in the transfer of funds. Financial liberalisation and growing regional trade have increased financial integration and financial integration is generally associated with capital mobility. Yet, it's associated risks have to be anticipated and managed.

Modern treasuries need to set up appropriate dealing room systems in terms of enabling policies, and equipment. It is important to have well trained dealers with necessary competence and equipped with more comprehensive skills, to excel in this challenging environment. Because dealers would be the only interface for the bank's treasury with the rest of the world for any transactions. Dealers need to understand the market intelligence in terms of news and events across the markets and to form views and take positions quickly. there are significant changes in financial market landscape.

Hence, to compete effectively in the more challenging global market place, the vital factor will be having the right skills, knowledge and expertise and the challenge then is to embrace the opportunities as they present themselves and to continuously develop new skills and competencies that will be needed to meet current and future demands.