Where other banks may have more dynamics to consider and thus more components, the opportunity costs applied in the funds transfer pricing process must comprised out of the following minimum components: The fund transfer rate (FTR) The funding spr…
19 OctoberBefore describing the individual parts that make up the opportunity costs of the fund transfer pricing process, let’s take a look at the concept in general and stress how it ultimately contributes to the bank’s net interest income (NII) and financ…
17 OctoberFunds transfer pricing (FTP) is a process used by banks to measure how each source of funding (deposits and loans) contributes to the bank’s profitability. A bank’s business depends on the deposits it receives. It uses these deposits to make loans…
29 SeptemberTo continue on with the banking series, I will assume here you have an understanding of a firm’s balance sheet and income statements. As we go on with the series, I will start to use industry specific jargon and even pull in specific terms from my…
8 SeptemberI was asked to elaborate more on the fractional reserve system for completeness sake. So, I will continue on with that first as it the fundamental method of banking in today’s banking systems. The fractional reserve system is a method in banking w…
3 SeptemberIn addition to my series on predictability and probability, today I would like to announce a new series on Banking. Mainly, I would like to, preferably weekly, outline a fundamental concept on how a fairly large bank works, how it generates its pr…
12 August