Funds transfer pricing: Difference between revisions
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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. | ||
Revision as of 14:02, 31 August 2016
Banking - internal transfer pricing.
(FTP).
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.
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.
