Sign In to Register
Q: Is funds transfer pricing (FTP) really necessary?
A: Yes, especially if you want to understand how your financial institution actually makes money!
Even though FTP is mandatory for robust earnings attribution, most banks and credit unions continue to view FTP as a "nice to have" or something that only large institutions need to use. This attitude is even reinforced by many regulators and policy makers who hold similar views.
Join FMS for our upcoming webinar, How to Increase Profitability with Funds Transfer Pricing, and learn how a comprehensive and well-functioning FTP framework can help your institution increase loan and deposit profitability and more effectively manage interest rate, liquidity and credit risk.
When the leaders of a depository institution tell regulators, shareholders and their employees the story of how the institution makes money, we often hear things like "We have really profitable loans and deposits!" or "We are growing the balance sheet at an extraordinary rate!" Unfortunately, such proclamations fail to demonstrate that the story is backed by proper risk attribution. Such statements may make everyone feel good, but they do not acknowledge the specific contribution of interest rate risk (IRR) and liquidity risk (LR) to the overall level of earnings.
To see why FTP is necessary, we need only recognize that IRR and LR are not just sources of potential earnings volatility, but that these risks actually contribute to the overall level of earnings. This should be obvious when you consider that the cost of hedging these risks is almost never costless; risk hedging causes earnings to go down while increasing risk exposures causes earnings to go up (at least in the short term). Without proper risk attribution, IRR and LR exposures can be increased quickly and quietly without anyone ever understanding how big of a bet has been made. When rates and spreads go the wrong way, the anticipated earnings do not materialize.
David Green, PhD, CFA, Managing Director from The Exequor Group, will share his expertise during this timely program and provide you with a greater understanding of:
- Why FTP is a necessary business management activity if management wants to understand all of the drivers of corporate earnings.
- How the profitability of lending and deposit gathering business units is only correctly quantified after they are immunized from IRR and LR.
- Product profitability in relation to capital allocation, performance management and strategic balance sheet management - if product profitability measures are flawed because of the absence of FTP or because FTP rates are arbitrarily determined, critical business decisions will not produce desired outcomes.
The Exequor Group
Dr. Green career spans over 20 years in banking, bank regulation, consulting and software development he'll share lessons learned on a broad range of risk and balance sheet management challenges. He has been a consultant for 9 years. Prior to consulting, he served as the Treasurer at BankUnited, the largest bank headquartered in Florida, where he was responsible for the investment portfolio, funding and derivatives, secondary marketing, FTP and ALM. Before joining BankUnited, he was the A/L Manager at SunTrust Bank where he built and managed all the static and stochastic interest rate risk models for the bank and worked to coordinate a number of business functions including budgeting/forecasting, funds transfer pricing and strategic balance sheet management. At SunTrust, he designed and implemented a comprehensive behavioral model for NMDs which included a dynamic FTP rate calculator.
Dr. Green is a former Chairman of the Georgia Bankers Association's A/L Management Committee. He also served as a Bank Examiner at the Federal Reserve Bank of Atlanta, where he also spent two years in research while completing his Ph.D. He served Chairman of SunGard/Bancware's US Client Advisory Council for many years. Dr. Green holds a Ph.D. in Economics from Georgia State University, a BS in Applied Mathematics from Georgia Tech and is a CFA charter holder. He has delivered over 100 public and in-house workshops around the globe on a range of risk and profitability management topics.
Registration to the live session includes:
- One online connection
- CPE credit for registrant
- Permission to reproduce the handouts and other written material for additional attendees at your
Only registered attendees of the live session can obtain
CPE credit. Attendees of FMS live webinars also receive two views of the On-Demand version of the program
they attend. Use this bonus feature to share the program with colleagues or as a refresher at a later date.
Instructions for viewing the on-demand session will be emailed to you at the conclusion of the live
|| Earn up to 1.5 hours of CPE
- Level: Basic
- Prerequisites: None
- Advance preparation: None
- Field of Study: Specialized Knowledge
- Instructional Method: Group Internet Based
- Length: 75 minutes
For more information regarding administrative policies such
as concerns or refunds, call 800-ASK-4FMS (800-275-4367). FMS is registered with the National Association of
State Boards of Accountancy as a sponsor of continuing professional education on the National Registry of CPE
Sponsors. State boards of accountancy have final authority on the acceptance of individual courses.
Complaints regarding sponsors may be addressed to: The National Registry of CPE Sponsors, 150 Fourth Avenue,
North, Suite 700, Nashville, TN 37219-2417 Web: www.nasba.org.
Members and Non-members sign in or create an account below to register.
Sign In to Register