NIBAF CTM flashcards
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33 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Three lines of defence
- A governance model where the business owns risk, an independent risk and compliance function oversees it, and internal audit provides assurance to the board.
- Segregation of duties
- The principle that execution, confirmation, settlement, and accounting for a transaction must be performed by different people to prevent error or fraud.
- ALCO
- The Asset-Liability Committee, a senior management body that approves treasury policy, reviews liquidity and interest rate risk, and sets funding strategy.
- Front, middle and back office
- Front office deals and takes positions; middle office independently values positions and monitors limits; back office confirms, settles, and reconciles transactions.
- Liquidity Coverage Ratio
- High-quality liquid assets divided by net cash outflows over a 30-day stress horizon, with a Basel minimum of 100 percent.
- Net Stable Funding Ratio
- Available stable funding divided by required stable funding over a one-year horizon, with a Basel minimum of 100 percent.
- Contingency Funding Plan
- A documented playbook listing early warning indicators, escalation triggers, and pre-approved funding sources to be activated during a liquidity stress event.
- Cash pooling
- A structure that offsets subsidiary cash surpluses and deficits, either notionally or physically, to reduce gross external borrowing and interest cost.
- Cash conversion cycle
- Days inventory outstanding plus days sales outstanding minus days payables outstanding; it measures how long cash is tied up in operations.
- Days sales outstanding
- Average accounts receivable divided by credit sales, multiplied by 365; it shows how many days customers take to pay on average.
- Reverse factoring
- A bank pays a supplier early at a rate based on the buyer's credit, while the buyer pays the bank at the original later due date.
- Working capital gap
- Current assets minus current liabilities excluding short-term debt; it represents the permanent funding need of the operating cycle.
- Bank discount yield
- Discount divided by face value, multiplied by 360 over days to maturity; it understates return because face value, not price, is the base.
- Repurchase agreement
- A sale of securities with a simultaneous commitment to repurchase at a set price; the haircut protects the cash lender against collateral price moves.
- Rollover risk
- The risk that short-term funding cannot be refinanced when it matures, forcing distressed asset sales or higher-cost replacement borrowing.
- Commercial paper backup line
- A committed bank credit facility that supports commercial paper issuance and covers repayment if the paper market closes at rollover.
- Weighted average cost of capital
- The blended required return on a firm's equity and after-tax debt, weighted by their market values, used to discount project cash flows.
- CAPM cost of equity
- The risk-free rate plus beta multiplied by the equity risk premium; beta measures the stock's systematic risk relative to the market.
- Debt covenant
- A contractual promise by a borrower, such as a maximum leverage or minimum interest cover ratio, whose breach can accelerate repayment.
- Maturity laddering
- Spreading debt maturities across many future dates so that no single year carries a concentrated refinancing requirement.
- Transaction exposure
- The FX risk on known contractual future cash flows, such as a receivable invoiced in a foreign currency.
- Covered interest parity
- The forward rate divided by the spot rate equals the ratio of the two currencies' interest rates, preventing riskless arbitrage.
- Money market hedge
- Replicating a forward contract by borrowing in one currency, converting at spot, and investing the proceeds in the other currency.
- Interest rate swap
- An agreement to exchange fixed and floating interest payments on a notional principal; a receive-fixed position gains value when rates fall.
- Duration gap
- Asset duration minus the ratio of liabilities to assets multiplied by liability duration; it measures balance sheet sensitivity to interest rate changes.
- Immunisation
- Matching the duration of an asset portfolio to the investment horizon so price risk and reinvestment risk offset for a single liability.
- Liquidity gap analysis
- Bucketing assets and liabilities by contractual and behavioural maturity to identify periods where cash outflows exceed available inflows.
- Value at Risk
- A statistical estimate of the maximum loss over a defined horizon at a given confidence level, excluding losses beyond that threshold.
- Straight-through processing
- Automated flow of trade data from capture through confirmation to settlement without manual re-entry, reducing operational risk.
- Nostro account
- A bank account held by a company or bank with a correspondent bank in a foreign currency; the correspondent records it as a vostro account.
- Know Your Customer
- Mandatory identity and beneficial ownership verification performed before onboarding a counterparty and refreshed on a periodic risk-based cycle.
- Conflict of interest
- A situation where personal interest or a related-party relationship could improperly influence a treasury decision, requiring disclosure and recusal.
- Market abuse
- Prohibited conduct including insider dealing, front running, and spoofing, which undermines market integrity and breaches securities regulation.