Our Country Commercial Bank Internal Funds Transfer Pricing Research

Banking loan is an important indicator of the economy of China. New loan growth, announced by PBOC monthly, has become one of the key China economic indicators as GDP and CPI. The growing speed and the structure of the new loans has not only affect the market’s prospects for the China’s economic development and inflation, but also on the Government’s macro-monetary policy. Moreover, it even affects the financial markets globally.By the end of Jun2011, the total loan balance was CNY51.4trillion in China; while the deposits balance was CNY78.64trillion, i.e. Loan-to-deposit ratio was65.36%. Commercial banks are facing a problem that how to combine the balance sheet size, the balance sheet structure and use marketing tools to achieve optimize the internal risk and maximize the revenue.This article is based on my6years’ experience in foreign bank trading and asset and liberality management department. I was trying to come up with a more suitable way or domestic commercial banks, especially for the large number of small and medium banks, to set up a FTP curve which is fit for the current CNY market situation.FTP (Funding Transfer Price) is an effective management tool for interest the rate risk of management, the bank internal resources of configuration and the performance evaluation of. Judging from the practice of foreign banks in China, most banks have set up their own internal funds transfer pricing system. But due to the lag in the development of domestic financial markets, many domestic commercial banks have not established an effective continuous operation of the funds transfer pricing system yet.This article clarified the characteristics of the various FTP systems and the CNY yield curve for both shorter and longer tenor. By which, the writer tried to find a way for the local smaller banks in China to set up a suitable CNY FTP curve.