Financial markets are continuously evolving in terms of products, participation and liquidity. The regulators, Reserve Bank of India and Securities & Exchange Board of India, are working in tandem to ensure a robust, safe and well regulated market in equities, bonds, currency and derivatives. The regulators and other stakeholders have also been coordinating for balanced development of financial markets under the umbrella structure of FSDC for ensuring financial stability.
The treasury function and trade financing operations of banks and financial institutions expose them to significant market and operational risk, apart from the credit risk. Therefore, management of these risks, for protecting the market value of equity and also generating income from the treasury operations becomes critical. For mitigation of market risk, the market participants could also increasingly make use of interest rate and forex derivatives provided they have the necessary understanding and expertise. Sanction and monitoring of non-fund based limits like letters of credit and guarantees which normally do not attract the kind of rigor and due diligence as fund based credit limits is another area of concern. The recent incidence of frauds / unauthorized use of SWIFT has highlighted the need for ensuring adequate controls and checks to limit the operational risk.
The need for a proper risk management structure including laying down and adhering to appropriate risk limits and controls cannot be over-emphasised. In this background, the objective of the program is to sensitise the participants on the risk mitigants and the monitoring mechanisms necessary for efficient running of their treasury function and trade financing operations.
Broad program outline
• Overview of financial markets, role of FSDC
• Liquidity framework & Market operations of RBI – LAF, Forex, OMOs
• Cash Markets – Forex spot & forwards, GoI bonds, SDLs & Corporate bonds
• Derivative Markets for hedging – Interest rate swaps, Cross-currency swaps, Options & Futures
• Measuring & Managing Market Risk – Use of Risk reports for monitoring
• Trade financing, recent incidence of frauds and lessons learnt
• Market Risk and Capital - Overview of revised market risk capital framework
• Managing Operational Risk in Dealing rooms