TREASURY MANAGEMENT

TREASURY MANAGEMENT (OR TREASURY

OPERATIONS)

 Management of an enterprise's holdings.

 It includes activities like trading in bonds

 Currencies

 Financial derivatives and also encompasses the

associated financial risk management.
BANK TREASURIES MAY HAVE THE
FOLLOWING DEPARTMENTS

 a. A Fixed Income or Money Market desk that is devoted

to buying and selling interest bearing securities

 b. A Foreign Exchange or FX desk that buys and sells

currencies

 c. A Capital Markets or Equities desk that deals in

shares listed on the stock market.
TREASURY POLICY UNIVERSITY OF
QUEENSLAND
 1. INTRODUCTION
 
 2. INVESTMENT POLICY

 3. BORROWING POLICY
 
 4. LEASING POLICY
 
 5. FOREIGN EXCHANGE RISK
 
 6. INTEREST RATE RISK POLICY
1. INTRODUCTION

 1.1 Overview
 Treasury activities

• Investment of Funds (both restricted and unrestricted)

 
• Cash Management
 
• Borrowing of Funds
 
• Interest Rate Risk
 
• Foreign Exchange Risk
OBJECTIVE OF THE POLICY
• Minimise the cost of borrowings, within prudent risk
parameters;
 
• Identify, minimise and effectively manage financial risk;
 
• Ensure professional interaction with financial markets.
 
PRINCIPLES UNDERLIE THE POLICY
• Compliance with all relevant statutes and their
amendments;
 
• Identification and effective management of financial
risks;
 
• Clear accountability;
 
• Adherence to a conservative approach to managing
financial risk
6. INTEREST RATE RISK POLICY

 Introduction

-Part 5 of the Statutory Bodies Financial

Arrangements Act 1982
FUNDING RISK

• All borrowing facilities will be approved by the Senate.

 
• The Senate should confirm, each year, what proportion of the total committed facilities are
required for ‘core debt’ purposes, in order that lower, more appropriate standby facilities are
allocated for liquidity/funding management purposes.
 
• Total committed facilities will incorporate a buffer, to ensure that funds are readily available,
to cover the payment of the University’s salary and wages and operating expenses. The buffer
is currently set at $120 million.
 
• No more than 50% of total debt facilities may mature within the next twelve months (excluding
facilities that are going to be retired within the next twelve months).
 
• Outstanding borrowings, at any one point in time, must not exceed an amount equal to the
total of committed bank facilities.
 
• Synthetic instruments are to be entered into only with the banks whose S&P long term credit
rating are A- or above and are listed in the schedule, in the Foreign Exchange Risk Policy.
 
INTEREST RATE CONTROL LIMITS
 Fixed Rate Debt Definition
-The University borrows $5 million for 2 years at a rate
of 6.50%.
Floating Rate Debt Definition
-The University borrows $5 million on a quarterly basis
for 2 years
Risk Control Limits
-0% or 100%
Foreign Currency Borrowings
- Borrowings in currencies other than the Australian
dollar
- Pre-approved by the Senate and, in any case, must be
swapped back into Australian dollars.
6.4 APPROVED SYNTHETIC INSTRUMENTS

 Approved Instruments

• Interest Rate Swaps (“IRS”)

Forward Rate Agreement (“FRA”)
• Interest Rate Caps (“Cap”)
Purchased to insure against higher interest rates. The insured
or strike rates must be within 200 basis points applicable
market interest rates
• Interest Rate Collars (“Collar”)
Selling of interest rate options is only allowed as part of a
combined strategy including the simultaneous purchase of
interest rate options with identical amount and maturity
 6.6 Reporting

 6.7 Performance Measurement/Benchmarking

TESCOTREASURY-
CASE STUDY