Funds transfer pricing

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 customers - and expand lending volumes - in the mistaken belief that this lending is profitable.

See also

• IRRBB
• Transfer price