TREASURY MANAGEMENT : THE CASE OF SINGAPORE

Abstract

This academic exercise attempts to look into the treasury activities of a bank which comprises of two main functions, namely, the treasury risk management and the treasury cost of fund management. An overview is given on the development and problems in the four major financial markets which include the money market, the capital market, the foreign exchange market, and the futures market. This is followed by a discussion on the various aspect of risk management which covers procedures on exposure management, problems encountered and issues on hedging and risk management instruments. The discussion on the cost of fund management dealt on concepts and computation methods, together with an empirical study on the comparison of swap rate and prime rate which represents two different fund sourcing approaches for corporate customers. The empirical evidence reveals that it is cheaper to raise fund through the swap market rather than borrowing from the bank based on prime plus basis.