Scope of Assignment

A leading GCC bank suffered a massive loss of over a billion U.S. dollars from selling complex derivatives to local brokers and exchange houses that defaulted when the value of the derivatives plunged during the recent financial crisis.

The bank had to be recapitalized, Treasury management and senior dealers were terminated, and the Treasury activities were severely restricted to basic funding and gapping, and simple foreign exchange.

BankT&D Consulting were asked to evaluate the bank’s Treasury business, associated support functions, and Market Risk structure and organisation and to make recommendations for restoring the Treasury’s ability to respond to customer needs in a well-controlled manner.

Our Work

BankT&D Consulting conducted a comprehensive review of Treasury Strategy, Organisation and Staffing, Products and Activities, Systems and Controls.  The interface and support provided to Treasury by Risk Management, Operations and Internal Control, were also reviewed in depth.

All relevant policies and procedures and Dealing Room systems were reviewed for relevance and effectiveness, and an assessment of staffing adequacy and experience levels of Treasury and Market Risk staff was also carried out.

The findings and recommendations were communicated to Executive Management at the conclusion of the review, and followed up by a detailed report.

Results

Management were pleased to be provided with a framework to re-establish risk-taking in the Treasury in a well understood and controlled manner, a framework that not only reflected global best practice but would also provide reassurance to the local regulators and the Board of Directors of the bank.  This eventually resulted in the bank hiring a new Market Risk Manager, producing a new Treasury Policy Manual, and a new Risk Manual.