Funds Transfer Pricing (FTP): A Primer
The objective of this paper is to describe a robust methodology for financial institutions, particularly banks, to allocate revenues and costs given the risks of making loans and taking deposits using a modern FTP methodology.
The methodologies that financial institutions use to allocate line items between business unites are called Funds Transfer Pricing (FTP) methodologies. FTP is not only a vital tool for managing a company’s balance sheet and measuring the risk-adjusted profitability, it is now a mandated regulatory requirement.
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