Module: | MODULE B: RISK MANAGEMENT
Q345: Consider the following statements regarding the responsibilities of the Treasury Back Office:
1. The Back Office is exclusively responsible for the settlement, issuance of confirmations, and accounting of trades executed by the Front Office.
2. To ensure accuracy, the Back Office must independently verify trade details with external counterparties without relying solely on the Front Office's deal slips.
3. In order to streamline overall bank profitability, the Back Office is permitted to initiate proprietary hedging positions during non-business hours.
2. To ensure accuracy, the Back Office must independently verify trade details with external counterparties without relying solely on the Front Office's deal slips.
3. In order to streamline overall bank profitability, the Back Office is permitted to initiate proprietary hedging positions during non-business hours.
✅ Correct Answer: A
The correct answer is A. Statement 1 is correct: The Treasury Back Office is the administrative engine of the treasury.
It handles the complete lifecycle of a trade post-execution, which includes settlement of funds, sending and receiving SWIFT confirmations, and passing the accounting entries into the core banking system.
Statement 2 is correct: A fundamental risk control is independent verification.
The Back Office must confirm trade economics directly with the external counterparty rather than blindly trusting the Front Office's internal deal slip, preventing unauthorized or dummy trades.
Statement 3 is incorrect: The Back Office is strictly an administrative and control function.
It has absolutely no mandate, authorization, or system access to initiate proprietary trades, hedge positions, or take on market risk at any time.
It handles the complete lifecycle of a trade post-execution, which includes settlement of funds, sending and receiving SWIFT confirmations, and passing the accounting entries into the core banking system.
Statement 2 is correct: A fundamental risk control is independent verification.
The Back Office must confirm trade economics directly with the external counterparty rather than blindly trusting the Front Office's internal deal slip, preventing unauthorized or dummy trades.
Statement 3 is incorrect: The Back Office is strictly an administrative and control function.
It has absolutely no mandate, authorization, or system access to initiate proprietary trades, hedge positions, or take on market risk at any time.