Funds Transfer Pricing
The Funds Transfer Pricing can be modeled
in a variety of way from the simplest to the most complex
and this feature allows you to understand the way in which
profitability is assessed. Profitability consists of
assessing the dynamics of three critical areas of the income
statement:
-
Margin
(the net of Interest Income minus Interest Expense)
-
Non-interest
income (NII)
-
Non-interest
expense (NIE)
IDM has 5 different way to assess funds
transfer pricing, and the decision on which one to use depends on
how the institution manages margin allocation internally. In
all instances, IDM balances back to the net Interest Income amount
in the G-L.
