Funds Transfer Pricing Master class

Funds Transfer Pricing [FTP] is critical to banks internal management of liquidity, funding and interest rate risk. Whilst regulators do not specify what FTP mechanism a bank should operate they do require it to be effective in ensuring that asset pricing includes an accurate reflection of funding costs. For a FTP mechanism to be successful, it requires the effective partnering of treasury, wider finance and the front line business.

This intensive workshop will utilize practical case studies to better equip delegates with an understanding of how FTP mechanisms have and are evolving, what is currently considered by the banking industry to be best practice in terms of their design and operation and strategies for overcoming challenges to them.

Hence by attending the workshop, delegates will be better equipped to participate in the functioning of existing FTP mechanisms, advise stakeholders on their suitability and opine on enhancements to better meet current and future challenges.

Learning outcomes

• Articulate the role of FTP within a bank and the regulatory requirements for it
• Describe the evolution of FTP methodologies from Zero Term Premium to Matched Term Premium pricing
• Determine suitable proxies for derivation of a FTP curve including those in under-developed wholesale markets
• Identify suitable basis adjustments to internally manage interest rate risk introduced by the funding model
• Combine FTP curves with behavioral models to better value non maturing assets/liabilities
• Adjust to FTP models to reflect regulatory impact such as LCR and Leverage ratio
• Evolve existing FTP models to include Capital as well as Liquidity Funding costs and regulatory impact
• Advise on enhanced portfolio analytics and opine on how alignment of business incentives are critical to the FTP mechanism’s success

Day 1:

• Session 1: Defining FTP and it's benefits
• Session 2: FTP Methodologies and deriving the FTP curve
• Session 3: Operating FTP

Day 2:

• Session 1: Focus on Behaviouralisation
• Session 2: Interaction of Basel Liquidity Regime and Funds Transfer Pricing
• Session 3: Pricing with FTP

Day 3:

• Session 1: Making FTP effective
• Session 2: Evolving to Total Funds Transfer Pricing (TFTP) – including cost of capital in FTP mechanism
• Session 3: Future evolution of FTP Models