Funds transfer pricing - Revision history

Doug: Layout.

2024-07-24T23:06:12Z

Layout.

← Older revision		Revision as of 23:06, 24 July 2024
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	For example, if flaws in a bank's FTP lead to a lending unit's funding costs being underestimated, the lending unit may misprice loans to external customers and offer them too cheaply - and expand lending volumes - in the mistaken belief that this lending is profitable.		For example, if flaws in a bank's FTP lead to a lending unit's funding costs being underestimated, the lending unit may misprice loans to external customers and offer them too cheaply - and expand lending volumes - in the mistaken belief that this lending is profitable.


	This problem has happened in the past, when many banks over-expanded their lending. Among other problems, the banks based their lending units' funding costs on the low interest rates payable for short-term wholesale funding, without properly considering the risks.		This problem has happened in the past, when many banks over-expanded their lending. Among other problems, the banks based their lending units' funding costs on the low interest rates payable for short-term wholesale funding, without properly considering the risks.

Doug: Identify treasury context.

2024-07-24T23:03:41Z

Identify treasury context.

← Older revision		Revision as of 23:03, 24 July 2024
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	''~~Banking~~ - internal transfer pricing''.		''Treasury - banking - internal transfer pricing''.

	(FTP).		(FTP).
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	[[Category:Accounting,_tax_and_regulation]]		[[Category:Accounting,_tax_and_regulation]]
	~~[[Category:The_business_context]]~~
	[[Category:Identify_and_assess_risks]]		[[Category:Identify_and_assess_risks]]
	[[Category:Manage_risks]]		[[Category:Manage_risks]]
			[[Category:Risk_reporting]]
	[[Category:Risk_frameworks]]		[[Category:Risk_frameworks]]
	[[Category:~~Risk_reporting~~]]		[[Category:The_business_context]]

imported>Doug Williamson: Classify page.

2022-06-24T09:11:08Z

Classify page.

← Older revision		Revision as of 09:11, 24 June 2022
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	* [[Transfer price]]		* [[Transfer price]]
	* [[Treasury]]		* [[Treasury]]

			[[Category:Accounting,_tax_and_regulation]]
			[[Category:The_business_context]]
			[[Category:Identify_and_assess_risks]]
			[[Category:Manage_risks]]
			[[Category:Risk_frameworks]]
			[[Category:Risk_reporting]]

imported>Doug Williamson: Mend link.

2022-06-24T09:10:47Z

Mend link.

← Older revision		Revision as of 09:10, 24 June 2022
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	* [[Hedging]]		* [[Hedging]]
	* [[Interest rate risk]]		* [[Interest rate risk]]
	* [[~~IRRBB~~]]		* [[Interest Rate Risk in the Banking Book]] (IRRBB)
	* [[Liquidity]]		* [[Liquidity]]
	* [[Liquidity risk]]		* [[Liquidity risk]]
	* [[Transfer price]]		* [[Transfer price]]
	* [[Treasury]]		* [[Treasury]]

imported>Doug Williamson: Expand.

2016-10-30T07:21:39Z

Expand.

← Older revision		Revision as of 07:21, 30 October 2016
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	FTP methodologies are important because they affect a bank’s internal profit allocation, and thereby influence business lines’ activities and appetite for risk.		FTP methodologies are important because they affect a bank’s internal profit allocation, and thereby influence business lines’ activities and appetite for risk.

			For example, if flaws in a bank's FTP lead to a lending unit's funding costs being underestimated, the lending unit may misprice loans to external customers and offer them too cheaply - and expand lending volumes - in the mistaken belief that this lending is profitable.

	~~For example~~, ~~if a bank's FTP leads to a~~ lending ~~unit~~'s funding costs ~~being underestimated~~, the ~~lending unit may offer cheaper loans~~ to ~~external customers -~~ and ~~expand lending volumes - in~~ the ~~mistaken belief that this lending~~ is ~~profitable~~.		This problem has happened in the past, when many banks over-expanded their lending. Among other problems, the banks based their lending units' funding costs on the low interest rates payable for short-term wholesale funding, without properly considering the risks.


			The internal transfer prices for funding need to deal fully with liquidity, interest rate and currency risks, and the costs of hedging them.

			FTP is typically carried out by the bank's treasury.


	== See also ==		== See also ==
			* [[Funding]]
			* [[Funding risk]]
			* [[Hedging]]
			* [[Interest rate risk]]
	* [[IRRBB]]		* [[IRRBB]]
			* [[Liquidity]]
			* [[Liquidity risk]]
	* [[Transfer price]]		* [[Transfer price]]
			* [[Treasury]]

imported>Doug Williamson: Expand.

2016-08-31T14:02:10Z

Expand.

← Older revision		Revision as of 14:02, 31 August 2016
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	For example, if a bank's FTP leads to a lending unit's funding costs being underestimated, the lending unit may offer cheaper loans to customers - and expand lending volumes - in the mistaken belief that this lending is profitable.		For example, if a bank's FTP leads to a lending unit's funding costs being underestimated, the lending unit may offer cheaper loans to external customers - and expand lending volumes - in the mistaken belief that this lending is profitable.

imported>Doug Williamson: Expand.

2016-08-31T14:01:04Z

Expand.

← Older revision		Revision as of 14:01, 31 August 2016
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	''Banking''.		''Banking - internal transfer pricing''.

	(FTP).		(FTP).

imported>Doug Williamson: Layout.

2016-08-31T13:59:47Z

Layout.

← Older revision		Revision as of 13:59, 31 August 2016
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	Funds transfer pricing deals with the internal transfer prices for funding, within a bank.		Funds transfer pricing deals with the internal transfer prices for funding, within a bank.


	FTP methodologies are important because they affect a bank’s internal profit allocation, and thereby influence business lines’ activities and appetite for risk.		FTP methodologies are important because they affect a bank’s internal profit allocation, and thereby influence business lines’ activities and appetite for risk.

imported>Doug Williamson: Expand.

2016-08-31T13:58:55Z

Expand.

← Older revision		Revision as of 13:58, 31 August 2016
Line 3:		Line 3:
	(FTP).		(FTP).

	Funds transfer pricing deals with the internal prices for funding, within a bank.		Funds transfer pricing deals with the internal transfer prices for funding, within a bank.

	FTP methodologies are important because they affect a bank’s internal profit allocation, and thereby influence business lines’ activities and appetite for risk.		FTP methodologies are important because they affect a bank’s internal profit allocation, and thereby influence business lines’ activities and appetite for risk.

imported>Doug Williamson: Update.

2016-08-31T13:58:22Z

Update.

← Older revision		Revision as of 13:58, 31 August 2016
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	For example, if a bank's FTP leads to funding costs being underestimated, the ~~bank’s~~ lending unit may offer cheaper loans to customers - and expand lending volumes - in the mistaken belief that this lending is profitable.		For example, if a bank's FTP leads to a lending unit's funding costs being underestimated, the lending unit may offer cheaper loans to customers - and expand lending volumes - in the mistaken belief that this lending is profitable.