New frontiers in treasury management at banks

In recent years, a number of organizational and governance models for bank treasuries have evolved in response to the growing sophistication of financial markets.

Below you will see the evolution of Treasury Management, over the years,

Banks in emerging markets have become more active risk takers and regard treasuries as profit centers. By contrast, leading players in developed markets increasingly have set up treasury units as service centers focused on liquidity and managing interest rate risk and governed as independent businesses. The figure below shows the role of treasury management, as played in different regions;

Will a fourth stage emerge in the next few years, with treasuries in developed markets again assuming an increasingly active role within the overall business models of banks? (If so, they wouldn’t necessarily be integrated in the same way that the banks of emerging markets have been during stage two.) Some treasuries have already embarked on this path. In the new approach, the asset- and liability-management function develops, among other things, structured on-balance-sheet products, using advanced techniques more actively to manage nonmaturing products (say, current accounts or credit cards) and the linkage of funding needs and customer products.

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