Funds Transfer Pricing (FTP)

Module 1: Introduction to FTP

• What is FTP and why banks need it

• FTP within the broader treasury and ALM framework

• Basic mechanics: charging and crediting business lines

• Match-funded vs pooled approaches

Module 2: Constructing the FTP Curve

• Yield curve construction

• Term structure and tenor matching

• Liquidity premium components

• Credit spread considerations

Module 3: Behavioural Adjustments

• Non-maturity deposit behavioural modelling

• Prepayment risk in loans

• Pricing optionality (e.g. embedded options in mortgages)

Module 4: FTP Application Across Business Lines

• Lending business

• Deposit-taking business

• Trading book vs banking book treatment

• Cross-currency FTP considerations

Module 5: Governance, Incentives and Pitfalls

• FTP governance framework

• Incentive effects of FTP on business behaviour

• Common pitfalls and sources of mispricing

• Case Study: Examples of FTP mispricing and its impact on business decisions

Module 6: Practical Workshop

• Exercise: Worked FTP calculation

• Group Discussion: “Aligning FTP with business strategy”

Training Objectives

By the end of the programme, participants will be able to:

• Understand what Funds Transfer Pricing is and why banks use it

• Understand how FTP curves are constructed, including tenor matching and liquidity premia

• Analyse how funding costs and benefits are allocated across business lines

• Understand behavioural adjustments in FTP, including deposit and prepayment assumptions

• Understand the governance of FTP frameworks and their effect on business incentives

• Apply FTP concepts to practical business line scenarios

Training Course Summary

This one-day programme provides a practical grounding in Funds Transfer Pricing (FTP) — the mechanism by which banks allocate the cost and benefit of funding and liquidity across their business lines. It covers the mechanics of FTP curve construction, including tenor matching, liquidity premia and behavioural adjustments for products such as deposits, mortgages and other loans with embedded optionality.

The course then turns to how FTP is applied in practice across lending, deposit-taking and trading activities, and examines the governance of FTP frameworks, including the incentive effects FTP design can have on business behaviour. Participants work through a practical FTP calculation exercise and case studies of FTP mispricing, leaving with a clear, applied understanding of how FTP connects treasury, finance and business line decision-making.