Mutual Trust Bank Treasury Function, Objective, Policy and Procedure Analysis

view with charts and images

Treasury Function, Objective, Policy and Procedure of Mutual Trust Bank Ltd

The Company was incorporated on September 29, 1999 under the Companies Act 1994 as a public company limited by shares for carrying out all kinds of banking activities with Authorized Capital of Tk. 38,00,000,000 divided into 38,000,000 ordinary shares of Tk.100 each.
The Company was also issued Certificate for Commencement of Business on the same day and was granted license on October 05, 1999 by Bangladesh Bank under the Banking Companies Act 1991 and started its banking operation on October 24, 1999. As envisaged in the Memorandum of Association and as licensed by Bangladesh Bank under the provisions of the Banking Companies Act 1991, the Company started its banking operation and entitled to carry out the following types of banking business:

(i) All types of commercial banking activities including Money Market operations.

(ii) Investment in Merchant Banking activities.

(iii) Investment in Company activities

(iv) Financiers, Promoters, Capitalists etc.

(v) Financial Intermediary Services.

(vii) Any related Financial Services.

The Company (Bank) operates through its Head Office at Dhaka and 68 branches. The Company/ Bank carries out international business through a Global Network of Foreign Correspondent Banks.

Registered Name of the Company

Mutual Trust Bank Limited

Legal Form

The Company was incorporated on September 29, 1999 under the Companies Act 1994 as a public company limited by shares for carrying out all kinds of banking activities with Authorized Capital of Tk. 38,00,000,000 divided into 38,000,000 ordinary shares of Tk.100 each.

Company Registration No.

c38707(665)/99 on September 29, 1999

Bangladesh Bank Permission No.

BRPD (P)744(78)/99-3081 on October 5, 1999

Registered Office:

MTB Centre, 26 Gulshan Avenue

Plot 5, Block SE(D), Gulshan 1, Dhaka 1212



Corporate Website


Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI, D)

The Institute of Banker’s Bangladesh (IBB)

Bangladesh Foreign Exchange Dealer’s Association (BAFEDA)

Bangladesh Institute of Bank Management (BIBM)

International Chamber of Commerce Bangladesh Limited (ICCB)

Association of Bankers Bangladesh Limited (ABB)

Bangladesh Association of Publicly Listed Companies (BAPLC)

American Chamber of Commerce in Bangladesh (AMCHAM)

Our Mission

We aspire to be one of the most admired banks in the nation and be recognized as an innovative and client-focused company, enabled by cutting-edge technology, a dynamic workforce and a wide array of financial products and services.

Our Vision

Mutual Trust Bank’s vision is based on a philosophy known as MTB3V. We envision MTB to be:

One of the Best Performing Banks in Bangladesh

the Bank of Choice

a Truly World-class Bank

For finance and treasury functions, the agenda is changing fast. Change is being forced with rapid economic developments, globalizing industries and competition, new technologies and revolutionary changes in the regulatory environment. As well as responding to these forces, finance and treasury functions are under pressure to add value to the organization through their operations and contribute to achieving strategic goals. With significant developments that have taken place in the financial markets in the recent years affecting volatility in exchange rates and accentuating liquidity constraints, corporate have started paying closer attention to the treasury and foreign exchange (forex) management.

Corporate treasury function is playing a pivotal role in financial risk management, exposure management and the use of hedging strategies are now all seen as essential requirements.

The concept of corporate treasury is defined through a comparison of traditional and emergent roles. The management accountants’ main task in cementing the treasury’s strategic role is:

a. To facilitate communications and understanding of strategic possibilities;

b. To aid implementation through the use of diagnostics, and

c. The development of gap and sustaining strategies.

These emerging strategies are linked by one fundamental objective i.e., to attract and retain competitively sought-after investor capital or, in other words, increase shareholder wealth. In

a world where investor capital has more choice and mobility than ever before, the key to corporate survival and growth lies in organizational change initiatives that will contribute directly to the economic value of the firm and its ability to satisfy the financial return requirements of its investors. Increasingly, treasury and treasury management practices a being aligned with and integrated into, the business strategies of organizations. It should not be surprising to see corporate treasury and treasury strategies involved in organizational change.

Therefore, whilst ensuring the effective management of all forms of risks, treasury managers must also be able to use and apply financial products in order to maximize profit. With the ever-increasing range and complexity of financial instruments available, treasury managers must constantly update their skills in order to effectively undertake their crucial duties.

Functions of Treasury Department

1. Money Market Money markets refer to raising and deploying short-term resources, with maturity of funds generally not exceeding one year. MTB money market is one of the most active and efficient desk in the interbank market of the country. The money market is sub-divided into Call Money, Term Money Market, SWAP, Repo & Reverse Repo etc.

Short Term Instruments. Introduction to Money Markets

The role of Money Market in the financial System; The money Market Instruments; Various Intermediaries and their Role; Influence of Monetary policy on Money Markets; Regulatory Framework in the Money Market; Recent Developments in the Monetary and Credit Policy.

Call Money: Features of Call Market; Developments in Indian Call Markets; Movements of Call Rates; Role of Reserve Bank of India; Call Markets in Other Countries.

Treasury Bills: Features of Treasury Bills; Types of Treasury Bills; Issuing procedure of Treasury Bills; Primary Market and settlement Procedures; Features of Treasury Bills Abroad.

Certificate of Deposits (CDs): Feature of CDs; Purpose for which CD’s are Issued; The Issuing Procedure; The Guidelines.

Bill Financing: Concept and Features of Bills of Exchange; Types of Bills; Procedure of Bill Financing; Foreign Bills; Discounting of Bills by NBFC’s; Commercial Bill Financing.

Repurchase Agreements (REPO’s): Nature and Purpose of Repo’s; Features of Report’s; Issuing procedure of Repo’s.

Gilt-Edged Securities Market: Feature of Government securities; Primary Market; Trends in the Government securities Market; Issuing Procedures and Redemptions; Role of RBI.

2. DIBOR Interbank market is considered to be a risk free market, though in reality, the banks do carry counterparty risk. However, for practical purposes, interbank market carries lowest risk, not only to sovereign risk; hence the interest rates prevailing in interbank market constitute “benchmark” rates. The call money rate as indicated by the overnight Dhaka Interbank Offered Rate is most widely accepted benchmark rate for corporate debt paper, as also for bank credit extended on floating rate basis.

3. Foreign Exchange Our dynamic Corporate and institutional marketing teams provide up to date market intelligence, advice and timely execution of deals of our customers throughout the trading day. Including the following:

Spot Foreign Exchange, Forward Foreign Exchange, Fx SWAP, Competitive Forex Rates for Remittances, Export and Import, Market outlook etc.

Foreign Exchange Risk Management

a. International Economics and International Finance

b. International Financial Markets and Instruments

c. Foreign Exchange: Swaps and Forwards

4. Primary Dealers Business: Primary dealer system is an agreement between two major stakeholders in the domestic government debt market. The central bank has given approval to Mutual Trust Bank Limited as primary dealer (PD) aiming to boost the country’s secondary securities market.

The authority has approved Mutual Trust Bank Limited as PD of the government securities dated November 23, 2009.Central Bank has taken the latest move to increase the number of market makers to bring dynamism in the secondary market.

Mutual Trust Bank, a dynamic third generation Bank, through its 44 network plans to gradually do business by selling government securities to corporate, institutions and individuals. The business will be administered by the MTB Treasury team, which is equipped with state of the art technology, the industry’s leading edge skilled manpower that have expertise in handling government securities trading.

5. Cash and Liquidity Management

a. Cash flow dynamics, cash flow forecasting, cash flow valuations

b. Short-term funding investment

c. Cash Management: transactions, pooling and netting

d. Working Capital Management

e. Using Debt Instruments

Other Treasury Functions are:

Financial Guarantees: Guarantee; Sources of Guarantees; Specialized Institutions offering Guarantees such as DICGC and ECGC; Polices Covered by DICGC and ECGC.

Internal Treasury Control: Structure and Organization of Treasury; Accounting and control; Various Measures of Controls; Insight into Information systems and Reporting Standards; Measuring Treasury Performance.

Tax Planning and Treasurer: What is Tax Planning? Avoidance and Evasion; Tax Planning and Treasurer; Computing the Capital Gains;

Managing Bankruptcy: Definition of Bankruptcy; Factors Leading to Bankruptcy; Symptoms of Bankruptcy; Bankruptcy Costs; Bankruptcy Prediction Models; Case Study- Barings.

Managing Customer and Investor Relationships: Services rendered by Banks; The Indian Banking Services; Investor Relations Programs; Disseminating Information; planning for contingencies; Dealing with Hostile Press.

Funds Management in Banks: Cash and Liquidity Management; Reserves Management; Investment Portfolio Management; Transfer Pricing; Asset and Liability Management; Forex Management.

Investment Portfolio of Banks: Investment portfolio of Banks; Investment Management; Components of Bank’s Investment Policy; Valuation of Investment Portfolio.

Asset –Liability Management: ALM Information Systems; ALM Organization; Liquidity Risk Management; Currency Risk Management; Interest rate Risk (IRR)

Objectives of Treasury Department

· To be a market leader in the primary dealership market and establishing a unique brand in the secondary securities market.

· To help enhance the liquidity and depth in the securities market through selling government securities and establishing new trading relationship with other parties.

· To develop secondary market by popularizing government securities to individuals and institutions

· To help Bangladesh Bank in achieving their strategic monetary targets.

· Main Aim: Maximizing Market valuation of the firm.

· Asset Liability (ST/LT) mismatch should not be there;

· Nature of Industry: Funding of Seasonal needs may deviate from above theory;

· Degree of competition; More weight age on Equity if more volatile, low entry barriers,

· High degree of competition etc;

· If high, Capital Structuring needs to be more conservative;

· At venture stage, Equity is more preferred;

· Past and Current Capital Structure: It is not a day-to-day decision on the debt equity mix

· Changes; it is altered not in Short term. It is only a Medium Term policy;

· Dilution of ownership by issuance of more equity exposes for take-over;

· Credit Rating;

Planning of Treasury Department

Expanding risk coverage

The range of risks that the treasury function is now expected to cover has expanded. As well as traditional risks such as foreign exchange, funding, liquidity and counterparty risk, the treasury function is increasingly likely to manage commodity price risk, insurance and pension risks.

Ensuring the policy is still relevant

The treasury policy is the road map for the treasury function and it must keep pace with overall business strategy ensuring that the appropriate risks are identified, the right processes are in place for managing and mitigating those risks and that roles and responsibilities are clearly defined and communicated.

Reducing the risk of operational errors

The treasury function frequently manages complex, high-value transactions under tight time constraints, which can create the potential for operational errors leading to significant financial loss. An operational risk framework that captures, categorizes and analyzes loss events is pertinent to both the banking and corporate world.

Achieving a clear view of the global cash position

Organizations operate on a progressively global basis. As a result it becomes increasingly challenging to manage a central view of all banking arrangements. Depending on the relative autonomy of different business units, it may not always be practical simply to rationalize all global accounts. Other cash management methods-such as payment factories and in-house banking- may offer a more successful solution.

Enabling timely and accurate cash flow forecasts

Having an accurate and timely view of the global cash position is vital for effective cash flow planning, and requires effective communication between business units. The treasurer may also provide valuable input into the longer term forecasting and budgeting processes and must work closely with the finance function.

Meeting strategic plans

Creating a funding program that is sufficiently flexible and responsive to achieve strategic objectives requires the corporate treasury function to make sure that its knowledge and understanding of the group business plans are consistent with the level, diversity, nature and maturity of the debt program it has in place.

Optimizing Return on Investment

With far more options available than simple bank deposits, the treasury function has to ensure that it is using the right instruments and investment methods that can fit both the risk profile and the required level of returns within the appropriate time frame.

Reporting Structure of Treasury Department

The reporting system for debt transactions should fit the needs of macro analysis, negotiations with lenders or with countries, the preparation of financial programs, budget monitoring, etc. For this purpose, lenders, countries, etc., must appropriately classify loans. The system of notification to the World Bank gives a basic framework for debt reporting, but must be supplemented to take into account other needs related to financial monitoring and forecasting, notably for the preparation of financial programs or debt negotiations.

Responsibilities of Treasury officials and their reporting obligation:

Treasury officials are prepared to suspend their daily reinvestment of Treasury securities held as investments in the Exchange Stabilization Fund, a fund held by the government to guard against exchange-rate fluctuations. Mutual Trust Bank has a treasury department and a team.

MTB has a dedicated Treasury team. Our aim to deliver the widest range of services customized to our client requirement. Our focus is to be the risk solution provider of choice and the premier market maker in the country.

MTB treasury offers sophisticated solutions supported by a large sales force and a state of the art dealing room in Bangladesh.

Currently our team covers Foreign Exchange, Fixed Income, Money Market, Corporate Sales and Primary Dealers Business.

This team consists of a supervisor and some subordinates under the supervisor. Subordinates are responsible to give report to the supervisor, and supervisor is responsible to give report to the board of directors.

Performance reporting: Reporting and measuring performance is often seen as an additional burden on the overstretched treasury department. Well thought out metrics and indicators, along with a robust reporting framework, can not only be used to measure the performance of the function, but can also help drive high performance.


High-performance treasury functions drive operational excellence throughout all levels of the organization. They are streamlined and flexible. They manage risk effectively, and they are able to contribute to the achievement of strategic business goals at the same time as ensuring that all statutory duties are met and compliance obligations are fulfilled.





4. Bangladesh Bank Web site