Treasury Credit Risk in Interbank Funding

Summary

Treasury credit risk is the assessment of the creditworthiness of banks and other counterparties that a bank engages through its treasury function. The treasury office oversees liquidity and capital, and may lend surplus funds to other banks or raise funding in interbank markets. Evaluating counterparties helps determine whether to continue or avoid those transactions.

The document distinguishes this function by where the credit assessment sits: it is credit risk managed within treasury activities, rather than a separate type of credit risk with a different definition. Its explanation is intentionally general, since treasury responsibilities and organizational structures vary across banks. It offers no quantitative framework, measurement method, or empirical evidence.

Key ideas

• Treasury functions oversee a bank’s liquidity and capital condition.
• Treasury teams may lend surplus liquidity to other banks and raise funds in interbank markets.
• Treasury credit risk concerns the creditworthiness of counterparties involved in those activities.
• The exact division of treasury responsibilities varies between banks.

Tags

# What is Treasury Credit Risk?


# What is Treasury Credit Risk?












I know that there are Treasury Credit Teams in Banks, so I would like to know what Treasury Credit is? I would also like to know the difference between Treasury Credit Risk and Credit Risk?

## Answer by Alex C (score 1, accepted)

https://quant.stackexchange.com/a/29749

Treasury Credit Risk is the assessment of Credit Risk within Treasury.

Banks have a Treasury Function or a Treasury Office that (simplifying a little) oversees all of the bank's money, and watches over the bank's liquidity and capital condition.

http://thegatewayonline.com/investment-banking/types-of-work/barclays-treasury-the-heart-of-the-bank

One job they perform is the lending of surplus liquidity to other banks and the raising of funds in in the interbank market. This office also has a risk management job, which includes constantly assessing the Credit Risk of other banks that they deal with. They might decide not to do business with BANK X if they think Bank X is about to go under, for example.

Every bank is organized a little different so this answer may be a little too generic.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.