Weak treasury recipe for risks

Kathmandu, August 1 :

Experts from banking and financial sector today said that sound treasury management (TM) is required to control risks in the banking system, including the functions of banking, money-market, capital market transactions, project financing, borrowing, investment and hedging instruments.

Krishna Bahadur Manandhar, deputy governor of NRB, said that TM is one of the critical issues for banks and financial institutions. Risk management is a key element and financial market players must have the inherent capability of handling currency and interest rate fluctuations at the internal and external level, Manandhar said. He was inaugurating the joint seminar on treasury management in banks and financial institutions, organised by the Institute of Chartered Accountants of Nepal (ICAN) and Institute of Chartered Accountants India (ICAI) today.

Manandhar said that management of cash flow, banking and money markets have to be done effectively. The management of money should ensure that a bank or financial institution has sufficient funds in appropriate currencies to meet its operational, financial and strategic objectives, said Manandhar.

He opined that technological development has brought about changes in treasury management worldwide as the entire spectrum of transactions have almost become paperless. In Nepal, adoption of new technology is needed to enhance our service quality and to integrate our financial system with the global system, he said.

He said that with a view to promote market-oriented, competitive and healthy financial markets, NRB has given complete liberty to individual banks and financial institutions to formulate their respective treasury management policies and guidelines.

Speaking at the function, Narayan Bajaj, president of ICAN, said that to boost the Nepali banking sector through the improvement of governance, institutions have to be involved in quality enhancement activities such as improving accounting sector. Treasury management is one of the critical issues that professionals involved in accounting sector should be aware of to prevent emerging risks in the financial sector, Bajaj said.

Shyam Ramadhyani, FCA of ICAI presenting a paper on treasury management in banks and financial institutions, said that treasury management monitors fund positions in banks, ensure maintenance of statutory liquidity and cash reserve ratios prescribed by the relevant regulator, ensure utilization and deployment of funds including raising of funds, generate business by offering a range of forex, derivatives and custodial services to their customers.

Resta Jha, representative of Standard Chartered Bank, presented a paper on treasury management, Nepalese perspective at a session chaired by Bruce Henderson, CEO of Rastriya Banijya Bank. Jha said that the current state of treasury management in Nepal is attributed to issues like lack of infrastructure to support treasury transactions, unavailability of treasury products from global market and lack of expertise.