Dissertations / Theses on the topic 'Funds Transfer Pricing'

Funds transfer pricing (FTP) is a management accounting technique used to identify the source of profits contributions for business units and products, and is a strategic tool to integrate risk management with decision-making. As very few studies have investigated the FTP model for commercial banks, this thesis attempts to identify the factors driving the bank FTP model and to develop the model. To develop the bank FTP model, the bank FTP process, which consists of the WHY, the WHAT, the WHO, the WHERE, the WHEN and the HOW factors, is designed. The WHY factor determines that the FTP model should be developed to enhance effective bank risk management process, and properly assign profit contributions within a bank to help achieve accurate bank performance evaluation. The WHERE factor demands that the FTP model should be developed at the bank business unit and instrument levels, and the WHEN factor requires that both the original and remaining term FTP models should be developed. The FTP model is developed with the responsibility accounting principles and financial risk management techniques, which are applied for the WHO, the WHAT and HOW factor design. The implications of the FTP model developed in this thesis are examined by applying the model in bank performance measurements. The FTP model is found to be able to properly assign bank risks to business unit managers who have control over the risks, and properly allocate profit contributions within a bank. The FTP model is also applied in the different types of banks, which have varying degrees of decentralization of risk management decision-making authority. It is found that the FTP model can achieves effective risk management and accurate business performance evaluation in the partially decentralized bank. The case study analysis of the FTP model in the Chinese bank shows that the bank FTP model developed in this thesis is more effective in risk management than the bank's FTP method.

This thesis describes and analyzes the most important areas of bank controlling. Amongst them are: cost management, planning and budgeting, and performance management. The thesis focuses on the newest knowledge in bank controlling and on best practice examples. The thesis also includes practice examples of some bank controlling areas of a particular Czech bank, ČSOB.

The fundamental business model of banks is based on receiving short-term deposits and giving long-term loans which means that active banks are naturally subject to liquidity risk. During the last financial crisis poor liquidity risk management was seen as one of the main causes which has led to an increased focus on the management of liquidity risk and the introduction of the first minimum requirements for liquidity in banks, through Basel III. As the topic of internal pricing in banks and the effects of the introduction of the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) is not extensively covered by existing research, the aim of this thesis is to identify and discuss internal pricing and liquidity cost allocation mechanisms used in practice by Swedish banks. The study also aims to investigate the impact of changes in liquidity requirements on internal pricing and liquidity cost-benefit allocation mechanisms in a Swedish setting. The key findings are that firstly, there are large variations regarding the sophistication of banks funds transfer pricing practices and liquidity cost allocation methods. The banks using less sophisticated methods may be exposed to model risk if they themselves are not aware of the implications of this. Two consequences of using simplified approaches may be distorted assessment of profitability and unwanted maturity transformation. Secondly, the findings indicate that the link between risk management and internal pricing in the banks is rather weak. Lastly, the introduction of LCR and NSFR have had a significant impact on the bank's risk management but the effect on internal pricing practices and methods for allocating liquidity costs is very limited.
Den fundamentala affärsmodellen för en bank baseras på mottagandet av kortfristig inlåning och utgivandet av långfristiga lån vilket innebär att banker är utsatta för likviditetsrisk. I samband med den senaste finansiella krisen sågs undermålig hantering av likviditetsrisk som en av de centrala orsakerna vilket har lett till ett ökat fokus på likviditetsriskhantering samt införandet av det första minimikraven gällande likviditet på banker genom Basel III. Då internprissättning hos banker samt effekten av att likviditetstäckningsgrad (LCR) och stabil nettofinansieringsgrad (NSFR) införts är ämnen som inte i någon större utsträckning täckts av tidigare forskning är syftet med rapporten att identifiera och diskutera internprissättning och metoder för allokering av likviditetskostnader. Vidare är syftet även att undersöka effekten av ändringar och kommande ändringar av regelverk på internprissättning och allokering av likviditetskostnader hos Svenska banker. De mest centrala slutsatserna är för det första, att det finns stora skillnader i hur avancerade bankernas metoder gällande internprissättning och allokering av likviditetskostnader är. Bankerna som använder mindre avancerade metoder kan vara exponerade mot en modell-risk om de inte är medvetna om följderna av att använda en förenklad modell. Två konsekvenser av att använda en förenklade modeller är att bedömningen av lönsamhet kan bli snedvriden samt att det kan uppmuntra till oönskad löptidstransformering. För det andra indikerar resultatet på att kopplingen mellan bankernas riskhantering och internprissättning är relativt svag. Slutligen så indikerar studien att LCR och NSFR har haft en signifikant effekt på bankernas riskhantering men att effekten på internprissättning och allokering av likviditetskostnader är mycket begränsad.

The fundamental business model of banks is based on receiving short-term deposits and giving long-term loans which means that active banks are naturally subject to liquidity risk. During the last financial crisis poor liquidity risk management was seen as one of the main causes which has led to an increased focus on the management of liquidity risk and the introduction of the first minimum requirements for liquidity in banks, through Basel III. As the topic of internal pricing in banks and the effects of the introduction of the liquidity coverage ratio (LCR) and the net stablefunding ratio (NSFR) is not extensively covered by existing research, the aim of this thesis is to identify and discuss internal pricing and liquidity cost allocation mechanisms used in practice bySwedish banks. The study also aims to investigate the impact of changes in liquidity requirements on internal pricing and liquidity cost-benefit allocation mechanisms in a Swedish setting. The key findings are that firstly, there are large variations regarding the sophistication of banks funds transfer pricing practices and liquidity cost allocation methods. The banks using less sophisticated methods may be exposed to model risk if they themselves are not aware of the implications of this. Two consequences of using simplified approaches may be distorted assessment of profitability and unwanted maturity transformation. Secondly, the findings indicate that the link between risk management and internal pricing in the banks is rather weak. Lastly, the introduction of LCR and NSFR have had a significant impact on the bank's risk management but the effect on internal pricing practices and methods for allocating liquidity costs is very limited.
Den fundamentala affärsmodellen för en bank baseras på mottagandet av kortfristig inlåning och utgivandet av långfristiga lån vilket innebär att banker är utsatta för likviditetsrisk. I sambandmed den senaste finansiella krisen sågs undermålig hantering av likviditetsrisk som en av de centrala orsakerna vilket har lett till ett ökat fokus på likviditetsriskhantering samt införandet av det första minimikraven gällande likviditet på banker genom Basel III. Då internprissättning hos banker samt effekten av att likviditetstäckningsgrad (LCR) och stabil nettofinansieringsgrad(NSFR) införts är ämnen som inte i någon större utsträckning täckts av tidigare forskning är syftet med rapporten att identifiera och diskutera internprissättning och metoder för allokering av likviditetskostnader. Vidare är syftet även att undersöka effekten av ändringar och kommande ändringar av regelverk på internprissättning och allokering av likviditetskostnader hos Svenska banker. De mest centrala slutsatserna är för det första, att det finns stora skillnader i hur avancerade bankernas metoder gällande internprissättning och allokering av likviditetskostnader är. Bankerna som använder mindre avancerade metoder kan vara exponerade mot en modell-risk om de inte är medvetna om följderna av att använda en förenklad modell. Två konsekvenser av att använda en förenklade modeller är att bedömningen av lönsamhet kan bli snedvriden sam tatt det kan uppmuntra till oönskad löptidstransformering. För det andra indikerar resultatet på att kopplingen mellan bankernas riskhantering och internprissättning är relativt svag. Slutligen så indikerar studien att LCR och NSFR har haft en signifikant effekt på bankernas riskhantering men att effekten på internprissättning och allokering av likviditetskostnader är mycket begränsad.

Funding liquidity risk was one of the main reasons for bank failure during the global financial crisis in 2007-2008. New legislation has been released in the form of Basel III, in particular the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR), to strengthen the liquidity requirements for banks; this makes funding liquidity a very important topic for banks. In this thesis, I will study the important factors that need to be taken into consideration when dealing with liquidity risk and how a bank can manage their funding liquidity risk. A key concept used in banks is Fund Transfer Pricing (FTP). This approach helps the banks to manage their interest rate risk. I will investigate how funding liquidity risk can be incorporated into this framework. It is important that this approach will still maximise the bank's overall profits. In order to achieve this I will initially evaluate a one time period model. This shows whether the bank's overall profits can be optimised using FTP. My results show that it is possible to allow each business unit to work independently and that, by using FTP, individual business units can be optimised consistently with the bank's overall profits. However, for this to occur, it is important to decide whether a bank is deposit rich or deposit poor as an incorrect assumption will lead to sub-optimal profits for the bank. Banks work in more than 1 time period; therefore, I will assess how the model can be extended and how FTP would work over multiple time periods. One major consideration is to account for the uncertainty regarding the timing of cash flows. This is because customers often have the option to prepay loans or withdraw their deposits. I will investigate an approach for calculating the cost of these options and how this can be included in the FTP framework. By applying a cost to the uncertainty, we can insure that the business units are incentivised in the correct way while still maximising the profits of the bank. Under my approach the treasury unit will be exposed to actual events in return for receiving a fair value for the cost of the option. The business units will be charged the cost of the option. There is potential for one party to act in their own interest by changing the value of the option. However, as both parties need to agree, this risk should be removed over time. I have shown how this can be done over 2 time periods but further research is needed to investigate over more time periods.

This masters thesis tackles the issue of process management in a financial institution, spe-cifically the analysis and optimization of the creation of a certain management report. The first part of this masters thesis is dedicated towards explaining basic theoretical concepts, which will help the reader correctly understand the rest of the paper. There you can find explained the principles of reporting and process management, which will introduce the reader to the issues of processes, their analysis and subsequent optimization. The practical portion first introduces the reader to the particular financial institution, then it describes the organization structure and the activities of data governance, thorough analysis of the particular process, the identification of and a suggestion of optimization which should lead to a more effectively working employees as well as the elimination of narrow places of the process. The conclusion of the masters thesis introduces steps of real implementation of the suggested solutions.

Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2013.
This thesis addresses the core issue of Funds Transfer Pricing (FTP) that has been brought about by the dynamic nature in the changes in the financial industry. This research has drawn up elements from a systematic historical perspective of how a funds pricing policy has been carried out among the banks. The research has made use of the elements of classical economic theory to formulate a conceptual model that will assist in the understanding of the dynamics of the driving changes in Funds Transfer Prices. In an effort to bridge the theoretical and empirical gap in classical economics and the value chain theory, a simple systematic model was constructed. This model was used to understand the dynamics of future changes in the Funds Transfer Pricing. This was done by first analysing the various components that have influenced the basic elements of the model. The basic elements are the liabilities, assets and the Treasury of banking institutions. The interaction of these elements forms the basis of the Funds Transfer Pricing model that was formulated. Using this model, banking institutions would be able to maximize profits and ensure customer satisfaction at the same time. The simple model proposed handles the problems that are caused by the more complex methods used and offers a practical and simple approach to Funds Transfer Pricing in commercial banks.

碩士
國立臺灣科技大學
財務金融研究所
104
This case study describes how internal funds transfer pricing (FTP) was used by a bank to match loans or other assets with deposits of the same amount and maturity (matched term funding). The FTP implementation process was considered with reference to various factors during the period between 2007 and 2014. It is expected that the specific experience contained in this case study will contribute to the knowledge base on how to build a timely and appropriate funds transfer pricing method. This in turn can guide the behavior of business or product owner and improve the bank's asset and liability management. Improved decision-making and the pursuit of an optimal bank asset/liability strategy has potential to maximize profits. The main conclusions of this study are as follows: 1. The FTP model used in this case study contained the following elements: (1) The fund transfer price of retail deposits was the market index rate plus or minus scope of price authorization and bid/offer spreads. (2) The fund transfer price of retail loans was the market index rate plus or minus scope of price authorization and bid/offer spreads, and also including an additional liquidity premium. (3) The fund transfer price of wholesale deposits was that of retail deposits plus or minus wholesale markup or discount. (4) The fund transfer price of wholesale loans was that of retail loans plus or minus wholesale markup or discount. 2. FTP was adjusted based on the bank’s asset to liability strategy and the present market situation. Market price was used to balance the distribution of products and set pricing and management strategies so as to maximize bank goals. 3. Pricing products by FTP may suffer for irrational competitive behavior. And there is an additional problem in the lack of market indexing which makes the construction of a market base FTP yield curve problematic.

碩士
國立中興大學
高階經理人碩士在職專班
94
“Fund transfer pricing(FTP)”of the banking industry refers to the cost of funds borrowing and lending among the branches. Appropriate FTP can make funds more efficient and create incremental benefits for banks. This study considers two dimensions, fund cost and market opportunity, to build up models in order to provide references for decision making. This study considers factors related to FTP in practice to build up two simple models. The optimal solutions under the profit-maximization goal are obtained. The results show that FTP is affected by the sensitivities of finds to interest rates of branches. The models in this study allow the headquarter to determine FTP in an aggregate view. I also apply the models to several cases to make up the strategies of interest rate pricing and adjustment as well as pricing of exceptional funds. These applications should increase the efficiency of fund operations. This study contributes to build up models to express bank practices and provides the determination of FTP. It helps to guide the daily operations of branches to attain the long-run goal of the headquarter.

碩士
國立政治大學
經營管理碩士學程(EMBA)
104
Most of the previous studies on the internal transfer pricing system discussed the advantages and disadvantages between different companies, this research focused on the effect of the strategic plan and policy change with regard to the adjustment of the bank's internal funds transfer pricing system (Funds Transfer Pricing, FTP). The result shows that after the targeted bank modify the RMB deposit FTP system by policy adjustments, significant effects come to the expected effect of product pricing, sales target and branch office behaviors. Positive on strengthening customer relationships and market competitiveness but the effects were not last long after similar product shows or the end of the adjustments. During the process, lack of maintaining exist customer relationship occurs. To enhance the effectiveness of the policy premium strategy and strategic adjustments, in this research we propose suggestions targeted on the design of the project, performance evaluation, customer management and tracking mechanisms for future policy making process on internal funds transfer pricing systems.

碩士
國立臺北大學
會計學系
107
The bank in the study is under pressure to improve its competitiveness from competitors and rapid market changes. In an effort to respond to these pressures, the case bank in this study implemented a funds transfer pricing (FTP) in 2014 for pricing internal funds transfer among its branches to get more precise information. This study investigates if the implementation of FTP will improve the performance of the bank branches. In addition, I further examine the mediating effect of deposit and loan structure on the relationship between FTP and the performance of bank branches. This finds that the bank effectively enhanced its branches’ profitability after implementing FTP. Moreover, deposit and loan structure does present the mediating effect on the relationship between FTP and the performance of bank branches. The results not only can rich the insufficiency of prior literature, but also provide better insights into product pricing and business structures for the case bank. In addition, it may offer lessons for other banks when they design their internal funds transfer pricing.

碩士
國立政治大學
經營管理碩士學程(EMBA)
95
For the reason that banking industry is the indirectly connected main funds’agent institutions within the financial market, under the most perfect circumstances, deposits absorbed by all of the banks after deducting the reserve can be loaned out. When there are opportune and sufficient capital adequacy, under no predictions, the most ideal loan/deposit ratio should be one minus reserved rate. However, since the economic backgrounds and management environments are different in banks of various regional branches producing obvious differences in supplies and demands of funds, it is hard to completely balance out sources and uses of funds in the operating units. Thus, banks’ internal funds transfer pricing must be disposed properly to avoid occurrence of uncontrollable fund gap producing floating risks. Furthermore, due to bank’s enormous organizational structure, other than headquarter, various sections, chambers and departments, there are branches everywhere. In order to smoothly achieve the overall goal of the bank, power distribution implementation must be penetrated. In another word, bank policy maker will be the basis for the bank’s overall goal. Separately, after the headquarter, various sections, chambers, departments and branches make their individual goals, through headquarter, various sections, chambers, departments and branches’achievement in their individual goals, will urge the realization of the bank’s overall goal. In order for each unit’s individual goal to be carried out and be executed to enable the success of the mechanism of power distribution system, the setting and accomplishment of each individual goal must be connected with the examination, critique and reward of the achievements. Thus, how the internal bank division design or select a set of funds transfer pricing system to instruct the appropriate disposition of the entire bank’s funds while producing adequate inducement to raise high achievement to stimulate each unit to try their best in achieving the bank’s overall goal, has been the bank policy maker or asset-liability management department’s ardent subject of discussion. The motive of this research is through a systematic method, aiming at banks under different internal funds transfer pricing system, to make an all-round discussion on the influences the selection of various funds transfer pricing system has on various unit achievements. Key words：Bank; Internal Fund; Transfer Pricing; Performance

碩士
輔仁大學
金融研究所
98
In 2008, the global financial tsunami hit the financial market of all countries. Since the reduction of interest will lead to the decrease of capital cost which helps to the growth of investment and economy. In order to rescue the desperate financial predicament, each country’s central bank takes the measure of interest rate reduction as their monetary strategy. The main purpose of this study is to find out the funds transfer pricing model after adjustment under the prosperity changes, and to calculate the bank’s profitability based on the maximum profit model, that is, how this model has effect on banks’ profitability. Additionally, this study will rationally and objectively evaluate the deposit and loan department’s performance of profitability based on the contribution of gross profit allocated deposit and loan to avoid the resource allocation mistake. Via the introduction of the fluctuation of market interest rates, Capital Cost Pricing theory is modified. Below are the results of this study: 1. Practically, the affiliated banks’interest pricing is different to funds transfer pricing. Affiliated banks will adjust the pricing in response to the market changes. The purpose is to prevent the happening of fluctuation risks,etc. The maximization of profit is not the only consideration. 2. After the financial tsunami, the interest rates have a tendency to declination. However, Funds Transfer Pricing model can fix the changes of market interest rates. In addition, it can adjust the over-amendment and under-amendment of price caused by human judgment. 3. While adapting the strategic adjustment of deposit and loan, the affiliated banks’ interest rates can be fixed according to adjusted profit budget. 4. The profit generated by interest contribution can be divided into deposit interest contribution and loan interest contribution. Followed, they are used to evaluate the performance of deposit department and loan departments respectively.

Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2013.
The recent market turmoil caused by the subprime crisis highlighted the fact that an inappropriate liquidity risk management process may strongly affect the capacity of banks to maintain their financial equilibrium and economic performance under stress conditions. In addition, it has been observed that the most significant challenge facing banks when they are adopting new regulations such as Basel I, Basel II and now Basel III is the imminent threat of imbalances between the interests of the shareholders and those of the regulator (Chabanel, 2011). This thesis proposes a framework on liquidity risk management in the banking book that a bank may adopt so as to improve the way in it could manage the anticipated changes within tits regulatory environment.

Dissertation presented as the partial requirement for obtaining a Master's degree in Statistics and Information Management, specialization in Risk Analysis and Management
O aumento drástico da esperança média de vida, a nível global, registado nas últimas décadas, em especial em Portugal, coloca enormes desafios à gestão do risco de longevidade por parte dos fundos de pensões e das seguradoras, sejam estatais ou privadas. Para ultrapassar esta problemática, têm sido desenvolvidos vários produtos de cobertura do risco de longevidade, assentes no mercado de capitais “derivados e bonds”, como alternativa ao mercado tradicional de resseguro, sendo que esta investigação focará a sua tenção no Pricing Longevity Bonds, através do modelo da transformada de Wang. Os Longevity Bonds são um dos produtos de cobertura de risco pouco explorados no mercado de capitais de gestão de risco de longevidade, como alternativa ao mercado tradicional do resseguro. A realização desta investigação tem como objetivo, a estimação dos preços de dois tipos de obrigações, clássicas e diferidas, obrigações semelhantes às que foram utilizadas pelo EIB/ BNP em 2004, utilizando uma simulação empírica com os dados, disponibilizados por The Human Mortality Database, entre 1980 e 2015, através do método de Lee Carter Poisson para alcançar a dinâmica estocástica da taxa de mortalidade em Portugal nos próximos 50 anos. Para a determinação do prémio de risco de longevidade, recorreu-se ao modelo; Wang transform, modelo que permitiu a realização de análises por género, diferentes idades, maturidade das obrigações e nível de risco da taxa de juros. Os resultados obtidos nesta investigação, diferem em função do género, da idade e do nível de risco, e poderão ser encontrados com mais detalhes na quinta secção. Assim sendo, esta investigação pretende contribuir para a resolução da problemática associada à estimação do preço da obrigação e, por outro lado, tornar mais percetível este produto, tão pouco explorado no mercado de capitais, mostrando que deve ser considerado, por parte de companhias de seguros e fundos de pensões, na gestão do risco de longevidade, transferindo uma parte da sua carteira de risco para o mercado de capitais como alternativa ao mercado tradicional de resseguro.
The drastic increase in recent decades of the average life expectancy globally, especially in Portugal, poses enormous challenges to the management of longevity risk by pension funds and insurance companies, whether state or private. To overcome this problem, various hedging products have been developed based on longevity in the capital market "derivatives and bonds" as an alternative to traditional reinsurance market, and this research will focus on Pricing Longevity Bonds through two models. Longevity Bonds is one of the hedging products unexplored in the capital market in longevity risk management afs an alternative to the traditional reinsurance market. This research aims to estimate the prices of two types of requirements, classic and deferred, similar to those used by the EIB/ BNP in 2004. Using an empirical simulation with the data, provided by The Human Mortality Database, between 1980 to 2015, by Lee Carter Poisson method, to achieve dynamic stochastic mortality rate in Portugal in the next 50 years. In determining the award for longevity risk, model was used, Wang transform, model that allowed the carrying out of analysis by gender, age difference, and maturity of obligations and risk level of interest rates. The achieved results of this research differ according to gender, age and level of risk, these can be found in further detail in Chapter 5. Therefore, this research aims to contribute to the problem of resolution associated with the estimation of bond price and on the other hand become a more noticeable product that is so little explored in the capital market, demonstranting that it must be considered by insurance companies and pension funds in the management of longevity risk by transferring a portion of their risk portfolio to the capital market as an alternative to the traditional reinsurance market.