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The Core of Banking Drives Future Business Models.


Function: (noun) an activity that is natural to or the purpose of a person or thing

Feature: (noun) a distinctive attribute or aspect of something


Treasury is, simply put, the core function of banking. Sometimes referred to as the “heart of the bank” which manages capital and liquidity so that all parts of the bank can readily access the financial resources needed for their activities – predominantly serving their clients.

Over the last decade the importance of this function has increasingly featured in how banks meet regulatory demands, withstand future market stresses and, increasingly, to be the subject matter expert both internally for business units and externally for clients on all matters regarding capital, liquidity and balance sheet.

So, an increasing feature of banking is the way in which Treasury connects every part of the bank, and how the core of banking impacts and relates to every business line, strategic decision and, therefore, clients.


While the banking industry is continually increasing in complexity as a result of regulatory implementation, business and market challenges, pressures from new market participants and the significant shift in the business profile of many banks – Treasury remains the core activity that is natural to the purpose of a bank.

Finding a way to amplify the input of Treasury across the organisation will benefit all parts of the bank by connecting expertise, insight and data to become a core feature of the way a bank works and develops the business models of the future.


Computer Says – here are some helpful things to consider…

Scenario Analytics is a significant element of treasury and business management. Asking the “what if?” questions allows us to explore risks, opportunities, new business lines or products and how our balance sheet or clients might respond.

Being able to run scenarios that are bespoke to a bank’s specific profile or to any one element or business line has historically been a multiple-spreadsheet and resource intensive exercise and almost certainly at the expense of granular, bottoms-up, analysis.

This is no longer the case with the introduction Waltham Analytics’ powerful platform which enables balance sheet optimisation or new business strategies to be explored while simultaneously evaluating stress test or performance metric resilience.

Like in a flight simulator the balance sheet manager can try out new approaches to identify ways in which to drive increased value for stakeholders across the bank and run bottoms up scenario analysis many times over revealing risks or opportunities that might otherwise have been overlooked.

Being able to view scenario analytics results, and then interact with them, from high level down to granular outputs – such as outliers or groups of events – increases the insight that any risk or business manager has available to them when making a decision or judgement call.

Not only does this approach help Treasury meet the increasingly bespoke stress testing requirements of the regulators but it can become a core feature of connecting the organisation around optimised data analytics.


Agent Based Modelling and Rapid Metric Calculation

Agent Based Modelling is designed to be applied in a wide range of analytical scenarios such changes in funding patterns or both asset and liability strategies. This enables Treasury managers to understand the sensitivities of the balance sheet more effectively and also allows businesses to understand the behavioural patterns of products and customer types at a granular level.

On a “BAU” basis this allows the bank to move to a true strategic Treasury. For new products or customer franchise areas the expected impact to net interest income and net interest margin will be more predictable. Additionally the impact on the balance sheet of changes in anything from one to multiple internal and external factors, such as interest rates, defaults, unemployment, inflation and so on can be modelled with greater clarity.

Treasury always has a keen eye on how changes in business models, behaviour of clients or counterparties etc. will impact the resilience of the bank to stress testing or other metrics. By using the advanced analytics platforms available today balance sheet metrics such as Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR), Net Interest Income (NII) and the sensitivity of each can be calculated rapidly for the duration of the scenarios run.

This gives a window into the future paths that balance sheet ratios and business performance may take, which until now has been very challenging to achieve.

Small Changes to Big Numbers equal Big Numbers

Adopting these analytical techniques enables Treasury to understand the drivers of key metrics with better precision, so being able to explore business model changes while simultaneously obtaining these insights has broad balance sheet management and business value add.

As banks begin to look forward to what the “new normal” might be the importance of not only optimising business processes and the balance sheet to ensure that returns are obtained in the most robust way, but the ability to try these out and connect the organisation around the results is a feature that Treasury can bring to all parts of the bank.

Getting this right will result in seemingly small changes, but, to large numbers and result in substantial positive results for the bank and its stakeholders.

Connecting the organisation around optimised data analytics is the future of balance sheet management, it brings engagement, agility and insight which has not been possible in the past.

The core function, and heart of the bank, is now a core feature of the way banks do business.

About the author

David Castle is the Founder & CEO at Waltham Analytics Ltd

[email protected]

This article was first published 22nd Oct 18 on


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