The role of Treasury in Portfolio Management

by Leonardo Orlando

Last time we explained how Treasury role has become crucial to monitor and control risk inside the Bank Organisation. Treasury needs to perform its funding and liquidity optimisation major role but at the same time it has to minimize market risk and optimize the Capital Management inside the overall risk management framework.

Now, in order to achieve its own core objectives, Treasury needs to put in place an efficient portfolio management, which ultimately can aim to:

  1. A.      Business Decision Making Support
    1. Obtain greater granularity and transparency for Treasury results
    2. Create an end-to-end information flow, to give business adequate information to evaluate usage of central Treasury resources
    3. Ensure that businesses are funded at the “correct” price on a consistent basis


  1. B.      Liquidity & Funding Optimisation
    1. Minimise funding excess
    2. Ensure that Treasury has access to the data required to optimise Barclays’ funding strategy
    3. Optimise the operating model for repo funding
    4. Optimise the size of the liquidity pool


  1. C.      Asset & Liability Management Optimisation
    1. Consolidate interest rate risk management across ALM & Execution (Treasury FO)


  1. D.      Capital Management Optimisation
    1. Improve the RWA / Capital data used to manage the Group and Solus capital requirements – making it more readily available, at the right level of granularity for both actual and forecast amounts

Let’s start here from point A – Business Decision Making Support. Treasury needs to create a data structure consistent with the rest of the Organisation, comprehensible for Business, capable to easily predict business decisions impact on finance/treasury.

In order to do that, Treasury needs to identify its reporting requirements, in terms of:

  • Level of granularity
  • Dimensions of analysis
  • Regulatory framework constraints
  • Forward looking reporting needs
  • Data integration layer with Finance
  • Data integration layer with Risk
  • Data integration layer with Business

The following golden rules should be reflected into the above requirements:

I. The lowest level of granularity should be represented by the instrument/product;

II. Dimensions of analysis required: Counterparty, Market, Business Cluster, Timeline

III. Regulatory impact should be analysed at a Global level, with respect of current and upcoming new rules (e.g.: Liquidity coverage ratio applied by Basel III)

     IV. Forward looking reporting should explain the forecast scenario principles and how Business drivers can influence on it

       V. Finance, Risk Management and Business should have a common point of reference in the reporting structure. It implies that a bulk of common KPIs should be set in order to reflect impact of Business decision on risk adjusted P&L

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