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TMA Treasury Markets Certificate study materials
TMA Treasury Markets Certificate study resources

TMA Treasury Markets Certificate: Banking and Corporate Treasury Management

TMA Treasury Markets Certificate · Work through your exam, one topic at a time.

All guide sections

Banking and Corporate Treasury Management

Banking and Corporate Treasury Management tests whether you understand treasury as a balance-sheet and cash-flow function, not just a trading desk. Questions often contrast bank treasury (liquidity, funding, ALM, capital) with corporate treasury (cash, working capital, FX/rate hedging, counterparty risk).

Core rules and concepts

  • Bank treasury manages structural liquidity and interest-rate risk: LCR = HQLA / net cash outflows over 30 days (minimum 100%); NSFR = available stable funding / required stable funding (minimum 100%); IRRBB covers repricing, basis and option risk in the banking book.
  • Funds transfer pricing (FTP) allocates funding cost or benefit to business units. A loan spread over FTP is not the same as net interest margin after liquidity and capital charges.
  • Corporate treasury forecasts cash, manages collections and payments, invests surplus, funds deficits, and hedges FX/rate exposures. Hedge ratios, tenor and instrument choice should follow policy, not market view.
  • Counterparty and settlement risk: diversify deposits and derivatives; use ISDA/CSA where appropriate; monitor exposure against limits.
  • Liquidity is not the same as profit: a highly profitable asset can be illiquid; a committed facility is not HQLA unless it is undrawn and qualifies.

Worked example

A corporate expects to pay USD 2,000,000 in 90 days. Spot USD/HKD is 7.8000; 90-day forward is 7.7800. Hedged cost = 2,000,000 x 7.7800 = HKD 15,560,000. If unhedged spot at payment is 7.7000, cost = HKD 15,400,000 (HKD 160,000 better); if spot is 7.9000, cost = HKD 15,800,000 (HKD 240,000 worse). The forward locks the budget rate and removes downside, but also removes upside. The decision should be governed by hedging policy and the certainty of the payable, not by a view that HKD will weaken.

Traps

Calling a hedge a profit centre; ignoring basis risk or forecast risk; double-counting liquidity buffers; using undrawn facilities as HQLA; forgetting that hedging a probable exposure may need documentation; confusing accounting hedge effectiveness with economic hedge purpose.