Interagency Guidance on Funds Transfer Pricing

The recently issued Interagency Guidance on Funds Transfer Pricing presents challenges for meeting requirements:

Extensive Challenges:  FRB, FDIC and OCC Guidance on Funds Transfer Pricing

The FRB, FDIC and the OCC issued an Interagency Guidance on Funds Transfer Pricing (FTP) practices for Large Banks and FBOs with CUSO assets of >$250BB (expected to be applied to banks with assets >$50BB over time).  The Guidance identified four principles that define the requirements firms are “recommended” to follow.

The implications for implementing the recommended FTP principles are wide-ranging and pose challenges depending upon the comprehensiveness of the firm’s current practices.  In order to comply, firms will need to formalize their FTP controls and practices regarding governance structure, policies and procedures documentation, firm-wide consistency, methodology documentation, model validation, detailed reporting, IT improvements and management oversight.

Determining the appropriate level of compliance will be challenging, while implementing the recommendations will be far-reaching, complex and costly.

Successful implementation could result in strategic benefits including: more effective risk-adjusted profitability analyses at the business unit, customer and transaction levels; increased Treasury empowerment; enhanced asset and liability risk management; and, better alignment of funding and risk taking activities.

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NextGen Strategic Advisors has developed a detailed approach for Meeting the Interagency Guidance FTP Challenges.  Please contact us to schedule a meeting.