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Funds Transfer Pricing
Funds Transfer Pricing (FTP) Solution
Banks across the world are struggling to sustain profitability in highly competitive and very difficult market conditions. A key driver of bank profitability is net interest income and margin.
Funds Transfer Pricing (FTP) is often critical to pricing funds based products to determine their profit contribution. It draws attention to products and operations that do not meet performance norms such as cost of capital or Risk Adjusted Return on Capital (RAROC).
Powerful profitability analysis with the FTP solution
Surya Software Systems’ Funds Transfer Pricing solution enables banks to measure and evaluate the net interest margin of their products and business lines, and to evaluate their profitability. FTP enables banks to improve their pricing decisions and overall profitability. Surya’s solution does this by:
- Providing data to centrally manage interest rate risk thereby eliminating the need to manage it at the business unit level
- Providing an accurate measure of business unit profitability
Surya’s FTP offers multiple transfer-pricing methods to identify the net margin and value contribution of funds gathered and used. Transfer-pricing methods fall into two major categories - the Pooled Approach and the Matched Maturity Approach, thus providing considerable flexibility in choosing FTP rates.
Banks can use FTP to:- Create Branches and Branch Groups, Products and Product Groups, and Customer Groups
- Define multiple FTP Rate Sheets
- Assign separate FTP rates for Products/Product Groups, Branches/Branch Groups, Volumes, and Customer Groups
- Define flexible income and expense items
- Include direct as well as indirect costs in calculations
- Allocate costs based on rules
Funds Transfer Pricing with comprehensive reporting
Surya’s FTP also provides a range of built-in reports that enables analyses at various levels. Key reporting features include:
- Profitability Analysis
- By business unit
- By product
- Division of Spread Analysis
- By lending spread
- By funding spread
- By interest rate risk spread
- FTP Report By Business Unit
- Off-set Center ‘Spread and Profit’ Report
- Comparative Reports
- Sensitivity Analysis
Key Benefits of FTP
- Centralize interest rate risk management: FTP provides data that enables the centralization of interest rate risk management, facilitating more accurate and timely management of risk.
- Ascertain the profitability of each portfolio: Analyze earnings for your entire institution, or by different profit centers.
- Maximize your returns: FTP allows for comparison analysis among products and branches, thus helping in sound business decision-making.
- Enhance accuracy and consistency: The FTP system includes a data interface module that facilitates integration of data from any transaction system of a bank. A standard format for data extraction has been defined and published for this purpose, ensuring accurate and consistent Net Interest Income definition.
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