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. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Commercial Code

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

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

    A financial institution that provides services, such as accepting ...
  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 FAQS
  1. How does the use of International Financial Reporting Standards (IFRS) affect key ...

    While much has been achieved since 2002 in convergence between international financial reporting standards (IFRS) and U.S. ... Read Full Answer >>
  2. How are C-suite officers measured on performance?

    Evaluation of C-suite officers, especially the chief executive officer (CEO), is an important element of fundamental analysis. ... Read Full Answer >>
  3. Who are Berkshire Hathaway's (BRK.A) main competitors?

    Led by renowned investor Warren Buffett, Berkshire Hathaway (BRK.A) is involved with multiple sectors of industry, facing ... Read Full Answer >>
  4. What are the biggest stadium naming rights deals of all time?

    The top three stadium naming rights deals of all time were all for stadiums hosting New York City teams. The largest was ... Read Full Answer >>
  5. What are the risks of investing in a company that has a high net debt?

    High net debt increases the risk borne by common shareholders and is one of the first items on the balance sheet to be analyzed. ... Read Full Answer >>
  6. What are the consequences of one party violating the terms of a letter of intent?

    The chemicals sector consists of a diverse group of companies that operate in different industries, such as specialty chemicals, ... Read Full Answer >>
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. Entrepreneurship

    How Microfinance and Investment Banking Compare

    Investment banks and microfinance institutions (MFIs) provide similar services, but the clients they serve and the incentives that motivate them are very different.
  9. Entrepreneurship

    Should I Have An IPO on My Business

    The ultimate outside investment opportunity is going public through an initial public offering. However, IPOs come with costs that you may want to avoid.
  10. Fundamental Analysis

    Calculating Net Interest Margin

    Net interest margin is a metric used to measure the effectiveness of a company’s investment decisions, particularly financial institutions.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center