PUBLIC FINANCE MANAGEMENT SYSTEMS MANAGEMENT SYSTEMS AND RISK - - PowerPoint PPT Presentation

PUBLIC FINANCE MANAGEMENT SYSTEMS MANAGEMENT SYSTEMS AND RISK MODELLING IN TURKISH TREASURY TURKISH TREASURY

OUTLINE OUTLINE

Public Finance Management Systems P t P

• Payment Process
• Information Systems and Its Counterparts

Risk Modelling

• Objectives of the Public Debt Strategy Model
• Model Building: The Conceptual Model
• Data Collection
• Coding
• Illustrative Results
• Illustrative Results

PUBLIC FINANCE MANAGEMENT SYSTEMS MANAGEMENT SYSTEMS

S B i F t Ab t Some Basic Facts About Turkish Treasury Public Finance Management Systems Systems

• Developed Fully Inhouse

Developed Fully Inhouse

• Change Management Integration

R l B d A C t l

• Role Based Access Control
• Enhanced Security Measures

PAYMENT PROCESS (SUMMARY) PAYMENT PROCESS (SUMMARY)

FRONT OFFICE

Weekly, monthly, quarterly projections

Domestic

Borrowing Information Borrowing Information

BACK OFFI CE

CASH MANAGEMENT

p j

Domestic Financing Information System(DFIS)

Debt Information

Form of remittance

Weekly projections

Accounting Information System(AIS)

Payment List

ACCOUNTING DEPARTMENT CBRT

Payment Order

DEPARTMENT

I N T I N T

Receivable D ti D bt

1

INFO. SYS.

INFORMATION SYSTEM AND ITS COUNTERPARTS

External Debt System

E R F A C E E R F A C E

Receivable Management System Domestic Debt System

2

OFFICIAL DOCUMENT

Payment Order Cash Based Ops. Payment Order Disbursement Non-cash Based Ops. Agreement Agreement 3

ACC. INTERF

Each journal defines the list of accounting ops

INTERF.

Accounting Interface

list of accounting ops. to be held for each transaction.

2

OFFICIAL

Payment Order Cash Based Ops Payment Order

INFORMATION SYSTEM AND ITS COUNTERPARTS

OFFICIAL DOCUMENT Order

Disbursement Ops. Non-cash Based Ops Agreement Order Agreement Based Ops. g 3

Each journal defines the

ACC. INTERF.

Accounting Interface

list of accounting ops. to be held for each transaction.

4

ACC. SYS SYS.

Accounting System

Central Bank. To Info. Systems

I N I N

External Debt System

T E R F A C E T E R F A C E

Receivable Management System Domestic Debt System

E E

5

External Debt To Risk Interface Receivable To Risk Interface Domestic Debt To Risk Interface MID OFFICE OPS:.

Ri k A l i Risk Analysis

DATA FLOW TO MIDDLE OFFICE RISK DATA FLOW TO MIDDLE OFFICE- RISK ANALYSIS

Data dissemination: Data dissemination:

 Repayment projections on existing debt; principal&interest  All CGS and GGS debt stock data  All CGS and GGS debt stock data. Stock tables include data about debt composition by lenders, by

instruments and remaining time to maturity of total domestic debt instruments and remaining time to maturity of total domestic debt stock.

These figures are “primary market” data These figures are primary market data.  Repayment of on-lent and guaranteed credits

G t d d l t d bt t k

 Guaranteed and on-lent debt stock

RISK MODELLING

Objectives of the Public Debt Objectives of the Public Debt Strategy Model: Turkish Case

 Assess the sensitivity of public debt to  Assess the sensitivity of public debt to

market movements Help quantify the costs and risks

 Help quantify the costs and risks

associated with alternative financing strategies: strategies:

Provide assistance in developing the

strategic guidelines strategic guidelines

Objectives of the Public Debt Strategy Model: The Strategic Benchmarks

Benchmarks for Liquidity Risk Management Benchmarks for Liquidity Risk Management

Before 2007 After 2007 Before 2007 After 2007 Average Maturity of Borrowing Portion of debt maturing within 12 months 12 months Balance of Treasury cash reserve Balance of Treasury cash reserve

Objectives of the Public Debt Strategy Model: The Strategic Benchmarks

Benchmarks for Market Risk Management Benchmarks for Market Risk Management

Before 2007 After 2007 Before 2007 After 2007 Fixed-Float Ratio of Borrowing, A Ti t Portion of debt with interest rate re fixed within 12 months Average Time to Interest Re-fixing rate re-fixed within 12 months Roll-over ratio of FX debt Currency composition of debt y p stock (local vs. foreign) Currency composition of FX b i Currency composition of FX- d bt borrowing debt

Model Building: The Conceptual Model Building: The Conceptual Model

Cost Scenario-1 Scenario-2 Strategy-1 Risk . . . S i Scenario-n Alternative Strategies (2,3, ..., m) Cost Risk

Model Building: The Conceptual Model

Conditional Cost-at-Risk (The Tail C@R) ( @ )

Probability

density density

Conditional Cost-at-Risk Conditional Cost at Risk Cost Cost-at-Risk

D t C ll ti Data Collection

Challenges in Input Modelling: Challenges in Input Modelling:

 Lack of long data series  Stationarity problems in data

 Regime changes  Financial crises

 Distributional assumptions

p

How to cope with extreme cases (event risk)

C di Coding

In-house model ? In house model ?

 requires

 programming skills  some capable software platform

 provides

 flexibility

• r commercial software ?

 provides

 professionalism and efficiency in model implementation

 may prove to be

 less flexible to cope with the government’s needs  restrictive in maintenance and upgrading  more expensive

Coding: The Public Debt Strategy Model Coding: The Public Debt Strategy Model

Macroeconomic Scenario Scenario Generation Debt Database

Expected cost & risk

• f a given

Database

• f a given

strategy

Alternative Strategies Cash Flow Modelling and Borrowing Requirement

Illustrative Results Distribution of Interest Costs Distribution of Interest Costs

300 200 250

CC@R

cy

100 150 Frekans

CC@R

Frequenc

42 44 46 48 50 52 54 50 42 44 46 48 50 52 54 Milyar YTL

Billion TRY

Illustr ative R e sults: Mode lling Analysis

Distr ibution of De bt Stoc k Pr

• je c tions

Distr ibution of De bt Stoc k Pr

• je c tions

80 90 60 70 MH (%)

GNP requency

40 50 60 Borç Stoku/GSM

Stock/G Fr

20 30 40 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20

years

Th k Y Thank You

Feyza Alkan Feyza Alkan Department of Market Risk Management feyza.alkan@treasury.gov.tr y @ y g