Treasury Department in a Bank

The main functions of a treasury department in a bank to manage asset and liability of the bank, which includes forecasting net interest income (NII) and measuring the bank's interest rate risk (IRR). The statistics generated by the department are typically fed to the bank's Asset and Liability Committee (ALCO), this committee is responsible for establishing guidelines for risk taking and balance sheet funding. The treasury department generally performs other related functions, such as managing the bank's reserve and risk capital requirements, funding the bank's balance sheet.

There are other functions often housed within the treasury department, including a process known as Transfer Pricing. At a high-level, the TP process centrally manages the funding requirements of the entire bank in lieu of having each division fund its own balance sheet.