treasury & fund management interactions between the markets
TRANSCRIPT
Treasury & Fund Management
Interactions between the Markets
The Nature of Cash FlowsCash Flows in a Commercial Bank and a Nonfinancial Business
Inflows
Outflows
Commercial Bank Nonfinancial Business
Receipt of a deposit from customer
Receipt of proceeds from borrowings
Receipt of repayment of a loan previously granted to customer
Collection of an account receivable
Termination of a deposit with another bank
Termination of a deposit with a bank
Purchase of currency Purchase of currency
Withdrawal of a deposit by a customer
Repayment of borrowings
Granting of a loan to a customer
Payment of account payable
Deposit of excess funds with another bank
Deposit of excess funds with a bank
Sale of Currency Sale of Currency
Value Dates
Spot Transactions
Forward Transactions
Eligible Value Dates
Interactions Between The Money and Foreign Exchange Markets A 3 Months deposit in PKR in the amount of Rs.80 million will be
received. A loan in USD in the amount of $1 million will be made with 3
Months maturity.Currency
Date Transaction Rs. $
June 30 Deposit Received
+ 80,000,000
Loan made - 1,000,000
Net Cash flows + 80,000,000
- 1,000,000
Sept. 30 Deposit Termination
- 80,000,000 – Interest
Loan repayment
+ 1,000,000+ Interest
Net Cash Flows - 80,000,000 – Interest
+ 1,000,000+ Interest
Net Exchange Position
- Interest + Interest
Operating in Money Market
Currency
Date Transaction Rs. $
June 30 Deposit Received + 80,000,000
Funds Placement - 80,000,000
Loan made - 1,000,000
Borrowed Funds - 1,000,000
Net Cash flows 0 0
Sept. 30 Deposit Termination - 80,000,000 - Interest
Placement Termination +80,000,000+ Interest
Loan repayment + 1,000,000+ Interest
Borrowed Funds Repayment -1,000,000- Interest
Net Cash Flows 0+ Interest
0+ Interest
Net Exchange Position + Interest + Interest
Operating in Foreign Exchange Market
Currency
Date Transaction Rs. $
June 30 Deposit Received + 80,000,000
Loan made - 1,000,000
Sale of PKR against USD on spot market
- 80,000,000 + 1,000,000
Purchase PKR against USD Value Date Sept. 30
NCF NCF
Net Cash flows 0 0
Sept. 30 Deposit Termination - 80,000,000 - Interest
Loan repayment + 1,000,000+ Interest
Purchase PKR against USD from June 30 contract
“estimated”+ 80,000,000
“estimated”- 1,000,000
Net Cash Flows estimation error- Interest
estimation error
+ Interest
Net Exchange Position - Interest - Interest