TREASURY TREASURY MANAGEMENT (1)MANAGEMENT (1)

Program Magister ManajemenProgram Magister Manajemen

Fakultas Ekonomi Fakultas Ekonomi

Universitas IndonesiaUniversitas Indonesia

Dosen:Dosen:

Edgar Ekaputra SE, MM.Edgar Ekaputra SE, MM.

FEB 02, 2010FEB 02, 2010

Tata Cara PenilaianTata Cara Penilaian:: -100%-100%

1.1. Keaktifan di kelasKeaktifan di kelas - 20% - 20% (presentasi dan diskusi)(presentasi dan diskusi)

2. Tugas tertulis/Test/Quiz/Simul2. Tugas tertulis/Test/Quiz/Simul - 40% - 40% 3. Ujian akhir Cawu3. Ujian akhir Cawu - 40%- 40%

Tata Tertib:Tata Tertib:1.1. Jangan terlambatJangan terlambat2.2. Berbicara angkat tangan, HP dimatikanBerbicara angkat tangan, HP dimatikan3.3. Participant Learning Class, saling mendengar & Participant Learning Class, saling mendengar &

menghargai pendapat orang lain.menghargai pendapat orang lain.4.4. Duduk ditempat yang sama + NamaDuduk ditempat yang sama + Nama5.5. Membuat kelompokMembuat kelompok6.6. Ketua kelasKetua kelas

LECTURER BACKGROUNDLECTURER BACKGROUND2008-2008- President Director, CEO - PT (Persero) DanareksaPresident Director, CEO - PT (Persero) Danareksa

President Commisioner, Danareksa SekuritasPresident Commisioner, Danareksa Sekuritas

2006-20072006-2007 President Director - NC SecuritiesPresident Director - NC SecuritiesLecturer Program S1 & MM, FEUILecturer Program S1 & MM, FEUI

2002-2006: 2002-2006: President Commissioner - PT Nusantara CapitalPresident Commissioner - PT Nusantara CapitalCommissioner - PT Nusantara InvestmentsCommissioner - PT Nusantara InvestmentsEntrepreneurEntrepreneur

1995-2001: 1995-2001: Managing Director, CFO & COO - PT (Persero) DanareksaManaging Director, CFO & COO - PT (Persero) DanareksaPresident Director - PT Danareksa FinancePresident Director - PT Danareksa FinanceCom - PT Danareksa SekuritasCom - PT Danareksa SekuritasCom - PT Danareksa Investment ManagementCom - PT Danareksa Investment ManagementCom - PT Danareksa FuturesCom - PT Danareksa FuturesCom - PT Danareksa Daiwa VenturesCom - PT Danareksa Daiwa VenturesCom - PT Danareksa Jakarta InternationalCom - PT Danareksa Jakarta International

1993-1995: 1993-1995: Director - American Express BankDirector - American Express Bank1985-1993: 1985-1993: Vice President - JP Morgan ChaseVice President - JP Morgan ChaseContactContact :: HP 0855 100 8838 E-mail : edgar@danareksa.comHP 0855 100 8838 E-mail : edgar@danareksa.com

2009 :2009 : 1 Gold 2 Silver Medal, Team DKI Jaya – National 1 Gold 2 Silver Medal, Team DKI Jaya – National Hanggliding Hanggliding Championship 2009, Bali Championship 2009, Bali

2008 : 2008 : Athlete PON XVII Gantolle DKI Jaya & Team Manager. Athlete PON XVII Gantolle DKI Jaya & Team Manager. The team Won 1 Gold and 1 Bronze Medal.The team Won 1 Gold and 1 Bronze Medal.

2007 : 2007 : Gold Medalist holder/Overall Champion Gold Medalist holder/Overall Champion (Juara Umum)(Juara Umum), , Team DKI Jaya – National Hang Team DKI Jaya – National Hang

Gliding Gliding Championship, Lanud Sulaiman, Jawa Barat Championship, Lanud Sulaiman, Jawa Barat Silver Medalist holder, Silver Medalist holder, Team DKI - 3rd National Team DKI - 3rd National

Microlight Microlight Championship, Lanud Adisucipto, DI Championship, Lanud Adisucipto, DI YogyakartaYogyakarta2006:2006: Silver medalist holderSilver medalist holder, Team DKI Jaya – National Hang , Team DKI Jaya – National Hang

Gliding Championship, Wonogiri, Jawa TengahGliding Championship, Wonogiri, Jawa Tengah2005:2005: Silver & Bronze medalist holder, Silver & Bronze medalist holder, 2nd National Microlight 2nd National Microlight

Aircraft Championship 2005, Lanud Sulaiman,Aircraft Championship 2005, Lanud Sulaiman, Bandung Bandung – – Jawa BaratJawa Barat

2004:2004: Overall Champion Overall Champion (Juara Umum), Team DKI - National (Juara Umum), Team DKI - National Hang-Gliding Championship, Telomoyo – Hang-Gliding Championship, Telomoyo – Central Central Jawa. Jawa. Gold MedalistGold Medalist, Target Landing Hang-Gliding Open , Target Landing Hang-Gliding Open Championship, Puncak, West Java.Championship, Puncak, West Java.

2003: 2003: Overall ChampionOverall Champion, (Juara Umum), Team DKI - National , (Juara Umum), Team DKI - National Hang-Gliding Championship, Telomoyo – Central Jawa.Hang-Gliding Championship, Telomoyo – Central Jawa.

2002:2002: 2nd Overall Runner-up 2nd Overall Runner-up (Juara Umum II), Team DKI) - (Juara Umum II), Team DKI) - National Hang-Gliding Championship, Telomoyo – Central National Hang-Gliding Championship, Telomoyo – Central Jawa.Jawa.Diangkat Ketua FASI GantolleDiangkat Ketua FASI Gantolle

20012001: : Gold MedalistGold Medalist, Target Landing – 1st National Microlight , Target Landing – 1st National Microlight Championship, Solo – Central Jawa..Championship, Solo – Central Jawa..

1996: 1996: Silver MedalistSilver Medalist holder, Indonesian National Team, I holder, Indonesian National Team, International nternational Open Hang-Gliding Championship, Wonogiri – Central Jawa. Open Hang-Gliding Championship, Wonogiri – Central Jawa.

19881988: : Indonesian TeamIndonesian Team – World Hang Gliding Championship, – World Hang Gliding Championship, Mount Buffalo - Australia.Mount Buffalo - Australia.

1984:1984: Ranked 21stRanked 21st international top rated pilotinternational top rated pilot – International – International Hang Gliding Championship, Sydney Australia. Hang Gliding Championship, Sydney Australia.

1982:1982: 1st position in 2nd Div1st position in 2nd Div Indonesian Team – International Indonesian Team – International Hang Gliding Championship, Sydney -Australia, Hang Gliding Championship, Sydney -Australia,

1980-19841980-1984: : Ranked # 1Ranked # 1, , National ChampionNational Champion-Certified Hang Glider -Certified Hang Glider Pilot Pilot (Master Rating 4) (Master Rating 4)

WHO ARE YOU ?WHO ARE YOU ?

Name & Calling nameName & Calling name

Where did you graduate s1Where did you graduate s1

Working ExperienceWorking Experience

Mention 2 of your strengthsMention 2 of your strengths

Mention 2 of your weaknessesMention 2 of your weaknesses

What you want to be in 5 years from nowWhat you want to be in 5 years from now

How are you going to get there ?How are you going to get there ?

What do you want to learn from Treasury What do you want to learn from Treasury Management ?Management ?

What we will Discuss onWhat we will Discuss onThe First Part: Treasury of The First Part: Treasury of

Financial InstitutionsFinancial Institutions

• Managing Liquidity RiskManaging Liquidity Risk• Managing Interest Rate RiskManaging Interest Rate Risk• Asset Liability Management –ALMAAsset Liability Management –ALMA• Debt and Capital Structure and RestructureDebt and Capital Structure and Restructure• Market Indicators and What they meanMarket Indicators and What they mean• Case Discussions Case Discussions • Treasury Simulation with real marketTreasury Simulation with real market• Overviews & ConclusionsOverviews & Conclusions

QuestionsQuestionsWhat is the difference between What is the difference between systematic and unsystematic Risk?systematic and unsystematic Risk?

What are the four What are the four elementselements of Risk? of Risk?

What different What different typestypes of Risks are of Risks are financial institutions faced with?financial institutions faced with?

What is the What is the most importantmost important financial risk? financial risk?

How does a treasury manager How does a treasury manager managesmanages liquidity Risk ?liquidity Risk ?

TREASURY MANAGEMENT (1) 13-TREASURY MANAGEMENT (1) 13-1414

MANAGING LIQUIDITY RISKMANAGING LIQUIDITY RISK

A. PRUDENTIAL PRINCIPLEA. PRUDENTIAL PRINCIPLE

B. LOAN SALESB. LOAN SALES

C. SECURITIZATIONC. SECURITIZATION

d. SETTING UP THE “BAD” BANKd. SETTING UP THE “BAD” BANK

DEFINITION OFDEFINITION OF

An Occurrence that will happen inAn Occurrence that will happen in

the future that we do not want.the future that we do not want.

What are Major Risk Categories ?What are Major Risk Categories ?

Systematic and Unsystematic RiskSystematic and Unsystematic Risk

THE FOUR ELEMENTS OFTHE FOUR ELEMENTS OF

1.1. ScaleScale of potential harm of potential harm

2.2. LikelihoodLikelihood of occurrence of occurrence

3.3. CapabilityCapability to Respond to Respond

4.4. ProbabilityProbability of that capability of that capability DeployedDeployed

TYPESTYPES OF FINANCIALOF FINANCIAL1.1. Liquidity RiskLiquidity Risk

2.2. Credit RiskCredit Risk

3.3. Interest Rate RiskInterest Rate Risk

4.4. Market RiskMarket Risk

5.5. Foreign Exchange RiskForeign Exchange Risk

6.6. Off-Balance Sheet RiskOff-Balance Sheet Risk

7.7. Country or Sovereign RiskCountry or Sovereign Risk

8.8. Technology & Operation RiskTechnology & Operation Risk

9.9. Insolvency RiskInsolvency Risk

WHAT IS LIQUIDITY RISK ?WHAT IS LIQUIDITY RISK ?

The possibility that aThe possibility that aFinancial institution will Financial institution will

have to incur have to incur losseslosses to meet to meet cash demandscash demands..

It is generally explained as a ratioIt is generally explained as a ratiocomparing available liquidity tocomparing available liquidity to

the demands of funds.the demands of funds.

” ”

BANK BALANCE SHEETBANK BALANCE SHEET

1.Cash1.Cash 1.Deposit1.DepositCashCash Giro, DepositGiro, Deposit

Marketable SecuritiesMarketable Securities TabunganTabungan

2.Earning Assets2.Earning Assets 2. Purchase Funds2. Purchase FundsLoansLoans BanksBanks

Non Banks FINon Banks FI

3. Non Earning Assets3. Non Earning Assets 3. Capital3. Capital

The Bank Balance SheetThe Bank Balance SheetBalance Sheet (IDR bn)Ended 31st December

2004 2005 2006FAssetsCash on hand Cash 371.0 463.8 233.5Demand deposits with Bank Indonesia Cash 2,619.3 4,199.0 2,735.6 Total placements with other banks Pl't w/ 954.8 1,340.2 1,313.7 Total securities Sec's 335.5 664.2 651.3

Total export note receivable 0.0 0.0 542.3Government bonds 3,820.3 3,671.6 2,297.8Marketable sec. purchased with agreement to resell 0.0 0.0 0.0

Total loans Loan 20,388.0 28,671.4 37,643.0Syariah funding

Allowance for uncollectable accoounts 0.0 0.0 0.0 Total acceptance receivables Accp 389.1 686.5 408.0Investment in shares of stock 117.6 90.2 108.2Deravative receivables Loan 4.6 10.8 13.0Interest receivables Prem 0.0 321.4 0.0Premises and equipment 389.3 440.5 537.2Acquired assets 123.4 123.4Deferred tax assets 77.2 39.0 42.8Other assets (incl. prepayments) 979.1 588.9 706.7Total assets 30,798.3 41,579.9 45,218.7

The Bank Balance Sheet-Cont.dThe Bank Balance Sheet-Cont.dLiabilities Current liablities 8.3 15.5 18.6

Total deposits Dept 24,733.3 34,377.6 37,670.9Deposits from other banks Pl't f/ 691.5 549.0 112.8Securities sold with agreement to repurchase 464.2 0.0 0.0Acceptance payables Accp 440.3 709.5 858.5Securities issued Sec.i 664.3 50.0 50.0Borrowings Bow'g 868.4 211.5 279.1Subordinated borrowings 127.3 1,069.0 974.8Taxes payables 24.6 91.9 110.2Est. losses on commitments and contigencies 5.2 5.7 5.2Other liabilities 394.9 511.2 642.1Total liabilities 28,428.6 37,610.3 40,741.8% to total assets

Minority interest 6.8 3.4 0.0

EquityCapital stock (par @ Rp250) Capt 748.6 949.8 949.8Additional paid-up capital 548.0 1,666.7 1,666.7Difference in foreign exchange 0.0 0.0 0.0Unrealised gain on inc. in FV of avai. for sale sc. (49.0) (118.8) (118.8)Revaluation in premises and equipment 255.1 255.1 255.1Share options 1.2 0.0 0.0Translation adjustment 83.8 216.8 216.8Retained earnings

Appropiated 775.3 996.5 1,507.3Unappropiated 0.0 0.0 0.0

Total equity 2,363.0 3,966.1 4,476.9

Total liabilities and equity 30,798.3 41,579.9 45,218.7 44,576.6

0.0

PRUDENTIAL PRINCIPLEPRUDENTIAL PRINCIPLE

AAmount Liquidity requiredmount Liquidity required

TTiming of Liquidity requirediming of Liquidity required

PPurpose of Useurpose of Use

SSources of Liquidityources of Liquidity

Cause and ManageCause and Manage

Causes of Liquidity RiskCauses of Liquidity Risk

1. Liability Side1. Liability Side

2. Asset Side2. Asset Side

Managing Liquidity RiskManaging Liquidity Risk

1. Purchased Fund1. Purchased Fund

2. Stored liquidity2. Stored liquidity

LOAN SALESLOAN SALES

1.Cash1.Cash 1.Deposit1.DepositCashCash Giro, DepositGiro, Deposit

Marketable SecuritiesMarketable Securities TabunganTabungan

2.Earning Assets2.Earning Assets 2. Purchase Funds2. Purchase FundsLoansLoans BanksBanks

Non Banks FINon Banks FI

3. Non Earning Assets3. Non Earning Assets 3. Capital3. Capital

SECURITIZATIONSSECURITIZATIONS

““Conversions of Bank Loans and other assetsConversions of Bank Loans and other assets

Into marketable securities for sale to investors.”Into marketable securities for sale to investors.”

It’s main purpose is to exchange It’s main purpose is to exchange Loans for Liquidity.Loans for Liquidity.

Most common are Most common are Mortgage Backed SecuritiesMortgage Backed Securities..

Two general types of securitization:Two general types of securitization:

With RecourseWith Recourse and and Without (Non) RecourseWithout (Non) Recourse

THE FINANCIAL CRISISTHE FINANCIAL CRISIS

Please Choose 1 TopicPlease Choose 1 Topic

a.a. SHOULD THE GOVERNMENT BAIL OUT SHOULD THE GOVERNMENT BAIL OUT BANK CENTURY?BANK CENTURY?

b.b. THE CRISIS DIFFERENCE BETWEEN 1998 THE CRISIS DIFFERENCE BETWEEN 1998 AND 2008 IN INDONESIAAND 2008 IN INDONESIA

c.c. THE CURRENT US FINANCIAL PROBLEMTHE CURRENT US FINANCIAL PROBLEMd.d. IDENTIFYING TRIGGERS FOR A FINANCIAL IDENTIFYING TRIGGERS FOR A FINANCIAL

CRISISCRISIS

Minimum 10 pages, 1.5 spacing, font 12 arial. Minimum 10 pages, 1.5 spacing, font 12 arial. Complete with conclusions & Complete with conclusions &

recommendationsrecommendations

TREASURY MANAGEMENT(1) TREASURY MANAGEMENT(1) 13-1413-14

LIQUIDITY MANAGEMENT CONCLUSIONLIQUIDITY MANAGEMENT CONCLUSION

PRUDENTIAL PRINCIPLEPRUDENTIAL PRINCIPLE

LOAN SALESLOAN SALES

SECURITIZATIONSECURITIZATION

SETTING UP “THE BAD BANK”SETTING UP “THE BAD BANK”

END OF LECTURE (1)END OF LECTURE (1)

The Treasury GameThe Treasury Game

JCI 2.588JCI 2.588Global Stock Market

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OIL PRICE BRENT $74.43/bOIL PRICE BRENT $74.43/bGlobal Oil Price (WTI)

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YTD Capital Gain (Right)

Price Index (Left)

(%)

• You are now Treasurers given US$ 1 million to manage/invest

Alternative Investment:• Stay in US Dollar at 0.5% p.a. (gross)• Sell USD against Rp at Rp9.408and

deposit at SBI at 6.49%(gross) p.a. or buy bonds at 114.16

• Sell USD against Rp at Rp 9.408 and buy the ISX Index at Rp 2.588

• Buy Oil at US$ 74.43/Barrel• Must gather 3 information from public

info as your rationale.• Highest yield gets 100 mark & prize

Questions for 2nd Lecture

1. What is the price of funds?

2. Why is interest rate risk important to a financial institution?

3. What is Gap Analysis?4. How is gap analysis

different from Duration Match Strategy?

5. What are the basic forms of derivatives?