Improvement Research Of SD Banks' Funds Transfer Pricing Model

Internal funds transfer pricing (FTP) refers to the flowing price of funds among different departments, products and branches within the bank. International practice of commercial banks indicates that internal FTP proves to be one of the most effective management methods that combine risk management, product pricing, resource allocation and performance appraisal. Since its first application by Bank of America in the 1980s, the internal FTP system has experienced 20 years of improvement and become a fundamental tool for modern banking operation, extensively used in western banks today. However, most banks in China have not built an effective internal FTP system due to such factors as a less developed financial market, control of interest rates and so on. With the development of China's market-oriented interest rate and continuous reform of the financial system, the traditional "depositing-lending" variance capital management cannot meet the requirements of assets and liabilities management and performance evaluation of modern commercial banks, the negative effect of which makes the domestic banks to look for reforming ways.The thesis explores the theory of internal FTP, compares the traditional method of Chinese commercial banks with FTP system of western commercial banks. The conclusion is that "matched-term" is the basis and direction of Chinese commercial banks' FTP. Based on case studies and current conditions of China's commercial banks, it puts forward the idea and several methods of reforming SD Bank's internal FTP as well as some specific suggestions about its application.The new ideas of this thesis lie in two aspects. The first one is that it proves the necessity and feasibility of Chinese commercial banks to use new funds pricing model. The second is improvement design of SD bank's FTP model.Because of the procedure of matched term model is very complex, the calculation is simplistic .This is the flaw of the thesis.