Treasury Operations and Risk Management
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Questions and Answers

What must a BSFI do if it cannot obtain sufficient information from a client?

  • Offer general financial advice instead
  • Request information from other financial institutions
  • Recommending a financial product anyway
  • Refrain from offering or recommending any financial product (correct)

    • Which of the following is a primary reason for assessing client suitability?

  • To foster cooperation from the client (correct)
  • To limit the number of transactions per client
  • To comply with internal policies
  • To increase the profitability of the institution

    • What must be done with client information before transacting in a new product?

  • Ignore if there are no changes
  • Document it in a general ledger
  • Review and update it (correct)
  • Share it with other financial institutions

    • How should technical or unfamiliar terms be managed during client interactions?

    <p>Explain them as needed to prevent misunderstandings</p> Signup and view all the answers

    What evidence must a BSFI obtain for a legal entity entering into financial transactions?

    <p>Authorization for transaction types</p> Signup and view all the answers

    What is the client responsible for regarding the information they provide to the BSFI?

    <p>Providing all information correctly and timely</p> Signup and view all the answers

    What should be documented when there are changes to a client's information?

    <p>The conversations and clarifications made with the client</p> Signup and view all the answers

    What controls should be implemented by a BSFI regarding client information?

    <p>Strict confidentiality and security measures</p> Signup and view all the answers

    What must the client confirm in writing before proceeding with a transaction despite the BSFI's assessment?

    <p>The client is informed of potential risks and protections lost.</p> Signup and view all the answers

    Which characteristic is NOT applicable to Government Securities (GS)?

    <p>They offer lower yields compared to other investment instruments.</p> Signup and view all the answers

    What defines Treasury Bills (T-bills)?

    <p>Short-term promissory notes issued by the National Government.</p> Signup and view all the answers

    Which statement is true regarding the trading of Government Securities?

    <p>They are tradeable on a daily basis during market hours.</p> Signup and view all the answers

    What do Treasury Bills primarily represent?

    <p>Short-term, zero-coupon debt instruments.</p> Signup and view all the answers

    What does the presence of the Philippine Dealing and Exchange Corporation (PDEx) ensure for Government Securities?

    <p>Best available market prices for trading.</p> Signup and view all the answers

    Which of the following is NOT a requirement for a client wishing to waive protections offered by client suitability rules?

    <p>Client paying a penalty for early termination.</p> Signup and view all the answers

    What is a major advantage of Government Securities mentioned in the content?

    <p>They are highly liquid and marketable.</p> Signup and view all the answers

    What is the maximum original tenor for debt instruments issued by public or private corporations?

    <p>25 years</p> Signup and view all the answers

    What is the minimum investment requirement for the secondary market?

    <p>P200,000.00</p> Signup and view all the answers

    Which of the following is true about corporate securities or corporate notes?

    <p>They enjoy better yields than government securities.</p> Signup and view all the answers

    How frequently are interest payments made on these debt instruments?

    <p>Quarterly</p> Signup and view all the answers

    What type of institutions are subject to a 20% withholding tax on coupon payments?

    <p>For-profit organizations</p> Signup and view all the answers

    What is the primary responsibility of the board of directors in relation to governance?

    <p>Establish standards of ethical behavior and governance</p> Signup and view all the answers

    Which of the following best describes the requirement to adopt a code of conduct?

    <p>It must be binding, especially for risk-taking personnel</p> Signup and view all the answers

    How should treasury activities be conducted according to the proposed guidelines?

    <p>Within a board-approved structure with strict controls</p> Signup and view all the answers

    What is an essential qualification for personnel in the Treasury unit?

    <p>High integrity and expertise in financial instruments</p> Signup and view all the answers

    What does the effective separation between operational units in treasury activities ensure?

    <p>Enhanced control and accountability within the structure</p> Signup and view all the answers

    What role does the management information system play in treasury activities?

    <p>It enables comprehensive monitoring and timely reporting</p> Signup and view all the answers

    What should the scope of authority for personnel in the Treasury unit do?

    <p>Be adequately defined, documented, and communicated</p> Signup and view all the answers

    Why is it important for the board of directors to ensure compliance with regulatory standards?

    <p>To avoid penalties and uphold market integrity</p> Signup and view all the answers

    What characterizes complex products in financial markets?

    <p>They involve terms and risks that are difficult for non-sophisticated clients to grasp.</p> Signup and view all the answers

    Which role primarily involves buying and selling securities for one's own account?

    <p>Dealer</p> Signup and view all the answers

    What is a primary responsibility of BSFIs when selling financial products?

    <p>To act with honesty, fairness, and professionalism.</p> Signup and view all the answers

    What should BSFIs ensure regarding the suitability of financial products for clients?

    <p>The products must align with the client's financial objectives and risk tolerance.</p> Signup and view all the answers

    Which of the following is NOT a type of financial product mentioned?

    <p>Foreign exchange</p> Signup and view all the answers

    What does 'securitization structures' refer to in the context of financial products?

    <p>Financial products backed by pools of assets, such as mortgage-backed securities.</p> Signup and view all the answers

    What principle guides the policies and procedures set by BSFIs during sales and marketing activities?

    <p>Proportionality</p> Signup and view all the answers

    Which statement best describes the information that BSFIs are required to provide to clients?

    <p>It should be sufficient, accurate, and comprehensible.</p> Signup and view all the answers

    What is the primary characteristic of an aggressive client in terms of investment?

    <p>They are willing to take on higher risks for potentially higher returns.</p> Signup and view all the answers

    What is required from a BSFI before recommending a product to a client?

    <p>A comprehensive assessment of the client’s risk tolerance.</p> Signup and view all the answers

    How should a BSFI mitigate any limitations in their scoring system for client profiling?

    <p>Through robust discussions with the client.</p> Signup and view all the answers

    What action is highly recommended for a BSFI to avoid disputes regarding suitability assessments?

    <p>Require the client to sign conformity to the assessment.</p> Signup and view all the answers

    What should a BSFI include in its record of suitability assessments?

    <p>Documentation of interviews and analyses conducted.</p> Signup and view all the answers

    Which product approach is allowed for a client with a previously assessed unsuitable profile?

    <p>Insisting on transacting in a particular product despite assessment.</p> Signup and view all the answers

    What role does client sophistication and risk tolerance play in a BSFI’s operations?

    <p>It guides the BSFI’s product offerings and required disclosures.</p> Signup and view all the answers

    What is the purpose of calibrating the client profiling scoring system for a BSFI?

    <p>To ensure it consistently reflects appropriate results.</p> Signup and view all the answers

    Study Notes

    Treasury Operation

    • Treasury is also known as the bank's market division
    • It meets individual and institutional customer investment and risk coverage needs
    • Four fundamental pillars: technology, products, distribution channels, and capability to manage and hedge risks
    • Technology is crucial for real-time market information, product pricing, and risk calculation, facilitating operations confirmation and liquidation
    • Products offered cover a wide range of financial assets, including structured products, fixed income, interest rates, equities, and exchange rates
    • Distribution channels enable products to be offered at competitive prices and locations
    • Operational risks arise from processes, people, systems and external events in addition to market, liquidity, and credit risks
    • Increased exposure to reputational risk from faulty product design, unethical practices, and failures to meet professional obligations to clients
    • Operational risk management framework includes governance structure, policies/procedures, effective internal controls, reliable MI system, and a robust process for dealing with clients.
    • BSFI treasury activities should maintain high integrity with a strong internal controls framework
    • Board of Directors are primarily responsible for establishing the tone of integrity
    • Front office personnel are responsible for transactions
    • Risk control function is responsible for transaction reviews
    • Back office responsible for settlement, confirmation, reconciliations and related processes
    • Financial products, especially complex ones, require clearly communicated strategies for sale and marketing
    • Client suitability processes are essential to determine appropriate financial products for individual client needs
    • Client information includes investment/funds, financial situation knowledge of products and experience
    • Client objectives, risk appetite, holding period, and legal-regulatory constraints must be considered

    Financial Products

    • Financial products include debt securities (bonds), equity securities (stocks), and hybrid securities (convertible bonds)
    • Derivatives and securitization structures are other financial products.
    • BSFI's responsibilities include acting honestly, fairly, using professionalism, pursuing best interests of clients, and managing risks arising from activities

    Client Suitability Processes

    • The process involves obtaining, classifying client information according to financial sophistication and risk tolerance, conducting a suitability review
    • Identifying the client's financial situation, needs, objectives, risk tolerance, and knowledge of financial markets and products
    • Client classifications include market counterparties, sophisticated institutional clients, sophisticated individuals clients, and other clients

    Government Securities

    • Government securities are debt instruments issued by the Republic of the Philippines to finance public expenditures
    • Types include Treasury Bills (T-bills), Fixed Rate Treasury Notes (FXTNs), and Retail Treasury Bonds (RTBs)
    • They are considered the safest investment due to their backing by the full taxing power of the government
    • They vary in terms maturity date, interest, and other characteristics

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    Related Documents

    Lesson 8: Treasury Operation PDF

    Description

    This quiz explores the essential functions of treasury operations within banking, including its role in meeting customer investment needs and managing operational risks. It highlights the four pillars of treasury—technology, products, distribution channels, and risk management—while discussing various financial products and their implications for institutional and individual investors.

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