Title: Managing of treasury in the banking system within a multi currency economy: evidence from Palestine

Authors: Nidal Rashid Sabri; Diama K. Abulabn; Dima Walid Hanyia

Addresses: College of Commerce and Economics, Birzeit University, Palestine ' College of Commerce and Economics, Birzeit University, Palestine ' College of Commerce and Economics, Birzeit University, Palestine

Abstract: The Palestinian economy has no national currency which led to having three currencies in use for deposits, saving, wealth measurement and trade transactions. The non-national currency status leads to various problems and add additional risk aspect, due to the fact that the changes in the exchange rates between the used major currencies are so significant. Thus, it leads to make challenges to the management of banking treasury activities and following balances of each single currency. Therefore, this research aimed to target this issue using three research instruments, including examining the related laws, imposed by the Palestinian Monetary Authority (PMA) on banks working in Palestinian economy, structured interviews with banks' treasurers, and a relevant questionnaire which was directed to a selected sample of treasury staff and employees regarding closeting of foreign currency positions. The study found that management of banks working in the Palestinian economy imposed more strict levels than that imposed by PMA regarding balances of the related currencies. The closing of surplus of currencies available in the Banks treasury, occur in the last hour of working day. The study recommended to relaxing the maximum ratio of each single currency to be hold, reducing the restrictions on investments outside Palestine, permitting trading in options and future transactions.

Keywords: treasury management; multicurrency economies; foreign currency positions; Palestine; banking industry; deposits; saving; wealth measurement; trade; risk; exchange rates; Palestinian Monetary Authority; regulation; related currencies balances; closing currency surpluses; maximum ratios; investment restrictions; options; future transactions; futures.

DOI: 10.1504/IJBEM.2015.066079

International Journal of Business and Emerging Markets, 2015 Vol.7 No.1, pp.25 - 36

Received: 18 Nov 2013
Accepted: 15 Mar 2014
Published online: 21 Jan 2015 *

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