Associate Banking Diploma — Option Subject Banking Operations - Regulations, Market practice & Treasury Management
Objective To enable Candidates understand: - The role and responsibilities of a bank’s treasury; - The practices involved in the markets where it operates, and - The impact of regulation on its activities.
1.		You are advised to study the following subjects prior to sitting this paper: Financial Reporting, Analysis and Planning International Trade Finance.
2.		This syllabus is concerned with money market, foreign exchange and capital market business from the point of view of the bank. This includes the role of the bank’s treasury in controlling risk, and the impact of external regulation. While most emphasis is placed on the Dar es Salaam market and regulation as applied by the Bank of Tanzania and Capital Markets and Securities Authority, candidates are expected to have a general awareness of practices in the UK, USA, Japan and the principal European Union countries.
SYLLABUS
1. Treasury Management of Financial Services Institutions
		1.1 The management of the bank’s own balance sheet exposures: liquidity and cash management; interest rate mismatch; foreign exchange (transaction and translation exposure).
	1.2	The Management of capital: need for capital; raising debt and equity; funding of investments.
	1.3	Prudential control : monitoring and control of dealing operations; avoidance of conflicts of interest; internal audit and compliance functions. Note that it is the role of the bank’s own treasury that will be examined rather than that of the bank as provider of these services to corporate customers.
2. Banking and Investment Supervision and Regulation
	2.1	Capital adequacy. The activities of the Basle group of supervisors and the application of their suggested rules by Bank of Tanzania.
	2.2	Bank of Tanzania control of banks’ foreign exchange exposures, liquidity and position risk. Control of the wholesale markets in Tanzania.
	2.3	Securitisation. Regulations relating to the use of securitisation as a means of managing banks’ balance sheets in Tanzania and the UK.
	2.4	Regulation of the euromarkets. Standard terms for currency and interest rate swaps (BBAIRS and ISDA), options (ICOM) and forward rate agreements (FRABBA).
	2.5	Regulation of investment business within Tanzania.
	2.6	Offshore banking centres - functions, regulation and developments.
Candidates will not be expected to have a detailed knowledge of the rules and regulations specified by the various Tanzania self-regulatory organisations, but should have a general understanding of the principles which drive them. Of particular importance are the dangers arising from conflicts of interest and the use of insider information.
3. Market Practice and Procedures
	3.1	Money markets in the UK, USA and euromarkets: loans and deposits; certificates of deposit; bankers’ acceptances; commercial paper; repurchase agreements; Central Money markets Office.
	3.2	Foreign exchange: spot and forward markets.
	3.3	Bond markets: eurobonds; floating rate notes; medium term notes; government securities and mortgage backed securities in the UK and USA; Central Gilts Office; stock lending; role and operation of rating agencies.
	3.4	Derivatives: interest rate and currency swaps; forward rate agreements; warrants; over-the-counter options in foreign exchange and interest rates; exchange traded options in foreign exchange, interest rates, bonds and stock indices; futures markets in the UK, USA and Europe. Aspects covered are as follows: - processing of transactions in both front and back office; - pricing and dealing conventions; - principles of accounting and revaluation; - types of market: telephone, screen, open outcry; - credit risk considerations; - role of brokers. Candidates are expected to be able to make foreign exchange and interest calculations in the following instruments: spot and forward foreign exchange; certificates of deposit; interest rate and foreign exchange swaps; treasury bills.
THE EXAMINATION Time Allowed: Three hours. Examination Format: Section A contains three questions. Candidates must attempt two questions. Each question carries 30 marks. Section B consists of three questions and candidates must attempt two questions. Each question carries 20 marks. RECOMMENDED READING Bank of England, The Regulation of the Wholesale Markets in Sterling, Foreign Exchange and Bullion (Bank of England). Thread needle Street, London EC2R 8AH. R Hudson; Treasury Management (CIB/Blackwells). Banking Operations - Regulation, Market Practice and Treasury management - Study Guide (CIB/Bankers Books). You should also consult the CIB’s Study Guide (Lesson Programme) for this subject. Recommended journals are the Bank of England Quarterly Bulletin, The Treasurer and Euromoney.