NIBAF CTM key terms

A board-approved document that sets the objectives, permitted instruments, limits, approval authorities, and reporting requirements governing a firm's treasury activities. It is the top-level reference against which all treasury decisions and exceptions are judged.

A control principle requiring that no single person both initiates and approves or records a transaction. In treasury it typically separates dealing, settlement, confirmation, and accounting so that error or fraud cannot pass undetected.

A formal record naming the individuals authorized to execute transactions, the instruments and amounts they may trade, and any counterparties they may use. It is reviewed and re-approved periodically and on staff changes.

A cap on the exposure a firm may have to a single counterparty, expressed in amount, tenor, or product terms. Limits reflect credit quality and are monitored daily so that excesses are escalated and resolved quickly.

A governance structure in which business units own and manage risk, an independent risk and compliance function oversees it, and internal audit provides assurance. It clarifies accountability and avoids conflicts of interest in treasury controls.

A regulatory measure comparing a bank's stock of high-quality liquid assets with its projected net cash outflows over a 30-day stress period. A ratio of at least 100 percent indicates sufficient short-term resilience.

The difference between cash inflows and outflows falling due in a given time bucket. Positive gaps indicate surplus funds to invest; negative gaps must be funded, making the gap profile central to funding planning.

A projection of expected receipts and payments over a defined horizon, built from contractual data, historical behavior, and business assumptions. Accuracy improves as horizons shorten, so rolling short-term forecasts drive daily funding decisions.

The practice of projecting cash flows and portfolio values under severe but plausible scenarios, such as deposit runs or market closures. Results inform contingency funding plans and the size of the liquidity buffer.

A documented playbook setting out early warning indicators, escalation triggers, and pre-arranged funding sources to be used in a liquidity crisis. It is tested periodically so that responsibilities and channels are known before stress occurs.

The number of days between paying suppliers and collecting cash from customers, computed as inventory days plus receivable days minus payable days. Shortening the cycle releases cash for other uses.

The average number of days a firm takes to collect payment after a sale, usually receivables divided by average daily credit sales. Rising values can signal weak credit control or deteriorating customer quality.

The average number of days a firm takes to pay its suppliers, usually payables divided by average daily purchases. Extending it conserves cash but risks damaging supplier relationships and losing early-payment discounts.

A report grouping receivables or payables by how long they have been outstanding, such as 0-30, 31-60, and over 90 days. It highlights collection problems and helps estimate expected credit losses.

A structure that combines balances across group accounts so that surplus cash in one entity offsets borrowing in another. It reduces external funding needs and interest cost while raising intercompany and tax considerations.

The market for short-term debt instruments and deposits, generally with maturities of one year or less. It provides the primary venue for investing temporary surplus cash and for raising short-term funding.

A negotiable or non-negotiable time deposit issued by a bank at a stated rate for a stated term. Negotiable CDs can be sold before maturity, giving the holder liquidity that a plain deposit lacks.

An unsecured short-term promissory note issued by large corporates and financial institutions, typically for up to 270 days. It offers cheap funding to issuers but must usually be backed by a committed bank line.

A transaction in which one party sells securities and agrees to buy them back later at a set price, economically a secured loan. Repos are a core money market funding and investment tool with low credit risk.

One hundredth of one percentage point, or 0.01 percent. Treasury professionals use basis points to quote interest rates, spreads, and hedging costs precisely, since small differences matter on large principal amounts.

The single discount rate that equates a bond's future coupons and principal to its current market price. It allows instruments with different coupons and maturities to be compared on a consistent basis.

A measure of a bond's price sensitivity to interest rate changes, expressed in years. A duration of five implies roughly a five percent price move for a one percentage point change in yield.

The extra yield a borrower must pay over a benchmark risk-free rate to compensate investors for default and liquidity risk. Widening spreads raise new funding costs and depress the value of existing holdings.

An independent agency's opinion of an issuer's or instrument's ability to meet obligations, expressed on a letter scale. Ratings influence access to capital markets, pricing, and eligibility for investment mandates.

A promise in a loan or bond agreement that the borrower must keep or must not breach, such as a maximum leverage ratio. Breach can trigger default or acceleration, so treasury monitors headroom continuously.

A binding agreement to exchange a specified amount of currency or another asset at a future date and a price fixed today. It removes uncertainty but is not traded on an exchange, so it carries counterparty risk.

A contract in which two parties exchange interest payments, commonly fixed for floating, on a notional principal. Treasuries use swaps to convert fixed-rate debt to floating or to alter portfolio duration without refinancing.

A set of accounting rules allowing gains and losses on designated hedging instruments to be recognized alongside the hedged item. It reduces earnings volatility but requires documented relationships and effectiveness testing.

The risk that exchange rate movements change the home-currency value of known foreign-currency cash flows, such as receivables or payables already contracted. It is the most easily identified and hedged form of currency risk.

The coordinated management of a firm's assets and liabilities to control interest rate, liquidity, and maturity mismatches. It aims to protect net interest income and economic value against adverse rate moves.

A document defining permitted investment instruments, credit quality thresholds, maturity limits, diversification rules, and reporting for surplus funds. It translates the board's risk appetite into operational constraints for portfolio managers.

A holding of high-quality assets that can be sold or pledged quickly to meet unexpected outflows. Its size reflects stress test results and regulatory requirements rather than expected cash needs alone.

Valuing a position at the price it would fetch in the current market rather than at original cost. It gives a realistic view of exposure but can introduce volatility into reported earnings and capital.

The daily process of matching a firm's internal cash records against a bank's statement for the same account. Unreconciled items indicate errors, fraud, or timing differences and must be investigated and cleared promptly.

A control requiring a second authorized person to review and approve a payment or trade before release. It catches input errors and deters fraud, particularly where amounts or counterparties are unusual.

The risk that one party delivers its side of a transaction but the counterparty fails to deliver the other, typically in foreign exchange. It is managed through counterparty limits, netting, and settlement systems such as CLS.

The due diligence process by which a firm verifies the identity, ownership, and business purpose of clients and counterparties. It underpins anti-money-laundering compliance and is a precondition for opening accounts or transacting.

Checking counterparties, beneficial owners, and payment parties against official restricted-party lists before and during a transaction. A match must be investigated and, where genuine, blocked and reported to the authorities.

A confidential filing to the financial intelligence unit describing a transaction or pattern that may indicate money laundering or terrorist financing. Filing is legally protected and staff must never tip off the subject.

The professional duty to protect non-public information about clients, counterparties, and the firm, sharing it only on a need-to-know basis or where legally required. Breach undermines trust and may be a regulatory offence.

An information barrier separating teams that hold price-sensitive knowledge from those who trade or advise, preventing misuse of inside information. Its effectiveness depends on physical, system, and procedural controls.

Trading or advising on the basis of inside information, or manipulating prices through false signals and abusive practices. Treasury staff with advance knowledge of funding or issuance plans are particularly exposed to this risk.