Funds Transfer Pricing
Funds transfer pricing allocates funding and contingent-liquidity costs and benefits across a bank's products and business lines.
Internal funding prices and liquidity-cost allocation used in bank product pricing, risk management, and profitability analysis.
Banks use internal rates to separate customer pricing from the value and cost of balance-sheet funding. Funds Transfer Pricing is the allocation framework, while an Internal Funding Rate is one rate charged or credited through that framework.
The framework and its rate are related but not interchangeable. FTP can include several matched-maturity, liquidity, optionality, and basis components rather than one institution-wide rate. Neither measure is a customer deposit rate, loan rate, or treasury-service fee credit.
When reviewing any of these rates, identify whether it is customer-facing or internal, the currency and legal entity, the relevant maturity or behavioral life, the included liquidity and optionality costs, and whether the number is used for pricing, risk management, or management reporting. An internal allocation can materially change business-line profitability without changing the customer’s contractual cash flows.
Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.
Funds transfer pricing allocates funding and contingent-liquidity costs and benefits across a bank's products and business lines.
An internal funding rate is the rate a bank assigns to a transaction or business activity for internal funding and liquidity allocation.