Funds Transfer Pricing

An application specifically designed to provide business insight into the profitability of the company’s loan, savings and treasury portfolios.

FUNDS TRANSFER PRICING OVERVIEW

As well as a regulatory requirement, FTP is an important process in an economic environment where interest rates and profitability are low. Having an understanding of how your different products and business lines are performing can provide useful insight into which lines are performing well and which are not.

Whistlebrook’s Funds Transfer Pricing (WFTP) Reporting application is specifically designed to provide business insight into the profitability of the company’s loan, savings and treasury portfolios. The various rate components, calculated by the Risk department, are fed into the application where they are then applied to produce account/deal level cost values.

FTP CHALLENGES

FTP is not a new concept, it has always been something that has been used to analyse the profitability of business units. However, following the financial crisis it’s importance grew as firms were forced to assess in greater detail the profitability of different lines.

For certain financial institutions FTP is becoming a PRA requirement as it ensures that firms allocate the true costs and benefits to the different products and business lines. This can provide a set of challenges for financial institutions:

  • How does a firm accurately allocate the cost of funding?
  • Can this be reliably achieved on spreadsheets?
  • How can a firm asses the ‘real’ profitability of different products, branches or business units?
BUSINESS BENEFITS

Our customers have achieved many of the following business benefits from the Whistlebrook FTP reporting application:

  • Profitability by product, branch/cost centre, business unit and market rate. Aggregation to sales channel, company, product group and brand.
  • Drill down to individual rate components to understand more fully the cost/investment return structure.
  • Time Series Analysis.
  • A balanced risk portfolio.
  • Incentivisation of the sales teams.
  • Quantification in margin terms of the impact of maturity transformation.
  • A single version of the truth via a centrally held, accessible data repository.
  • Dissemination of read-only data with interactive drilldown via an industry standard mechanism (Excel).
SUMMARY

Funds Transfer Pricing analysis provides a complex challenge for financial institutions. With our expertise and experience in the financial services sector, Whistlebrook has developed a purpose built solution, that addresses this challenge. Several institutions are already benefitting from the Whistlebrook FTP application which is making the process of analysing and reporting the profitability of their different business areas a far simpler activity.