Funds Transfer Pricing - FTP

AAA

DEFINITION of 'Funds Transfer Pricing - FTP'

A method used to individually measure how much each source of funding is contributing to overall profitability. The funds transfer pricing (FTP) process is most often used in the banking industry as a means of outlining the areas of strength and weakness withing the funding of the institution. FTP can also be used to indicate the profitability of the different product lines and each staff member, as well as act as a great medium for comparison between employees, branches, etc.

INVESTOPEDIA EXPLAINS 'Funds Transfer Pricing - FTP'

To guage FTP, banks can first establish a FTP curve. A general curve is calculated by plotting the relationship between yield to maturity and time to maturity, then adjusted to reflect the lending needs of each location. A rate is then assigned to each of the transactions that occur at the bank. For example, a five-year bond would have a different rate than a 10-year bond. Finally, all of the rates are entered into the FTP system.

RELATED TERMS
  1. Commercial Code

    Private and public laws that regulated how commerce is to be ...
  2. Financial Institution - FI

    An establishment that focuses on dealing with financial transactions, ...
  3. Commercial Bank

    A financial institution that provides services, such as accepting ...
  4. Bond

    A debt investment in which an investor loans money to an entity ...
  5. Transaction

    1. An agreement between a buyer and a seller to exchange goods, ...
  6. Profit

    A financial benefit that is realized when the amount of revenue ...
Related Articles
  1. Investing

    Zooming In On Net Operating Income

    NOI is a long-run profitability measure that smart investors can count on.
  2. Insurance

    The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  3. Economics

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  4. Active Trading Fundamentals

    Tips For Controlling Investment Losses

    A profit/loss plan helps investors recognize mistakes and invest logically, rather than emotionally.
  5. Taxes

    The Impact Of U.S. Corporate Taxation On Investment Decisions And CFC Transfer Pricing

    To avoid taxation, businesses do careful tax planning, taking into consideration more than one country's taxation system.
  6. Options & Futures

    EBITDA: Challenging The Calculation

    This measure has a bad rap, but it's still a valuable tool when used appropriately.
  7. Retirement

    What Was The Glass-Steagall Act?

    Established in 1933 and repealed in 1999, the Glass-Steagall Act had good intentions but mixed results.
  8. Fundamental Analysis

    Equity Multiplier

    The equity multiplier is a straightforward ratio used to measure a company’s financial leverage. The ratio is calculated by dividing total assets by total equity.
  9. Investing Basics

    What is the difference between an IPO and a seasoned issue?

    Learn how companies issue IPO securities when they first go public and seasoned issue shares if they sell more shares in the secondary market.
  10. Fundamental Analysis

    What is the average profit margin for a company in the oil & gas drilling sector?

    Understanding the profit margin is an integral aspect of analyzing whether an oil & gas drilling company is a worthwhile investment.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center