Presenter: Professor Moorad Choudhry 

Video Lectures:

Part 1 (Running Time: 1.25:37)

Part 2 (Running Time: 44:31)

Part 3 (Running Time: 1.00:43)

Part 4 (Running Time: 47:27)

Bank internal funding management has been highlighted by regulators as one of the key segments of an effective liquidity risk management framework, and an important policy area in liquidity risk management. This one-day course provides comprehensive coverage of business best-practice approach to bank internal funds pricing. Aimed at senior or experienced Treasury and Finance practitioners, it covers the complete spectrum from governance and internal funding policy to risk measurement and returns analysis.

Delegates should leave with an understanding of leading edge FTP practice and how it can be integrated into bank asset-liability management and balance sheet management, thus optimising their bank’s liquidity management framework. The framework and recommendations are applicable in retail, corporate and investment banking business models.

Key Features:

• An effective internal funding framework
• Objectives of internal funding policies
• Integrating FTP into overall liquidity policy
• The cost of funds: applying the true bank funding cost to the business
• Funding policies: banking book, securities trading book, derivatives book
• Setting the correct market-implied FTP curve
• Treasury operating model, FTP and balance sheet management
• Assets and Liabilities Behaviouralisation
• FTP and liability strategy
• Template FTP policy for a commercial bank: example illustration

The Concept of Internal Funds Pricing

• An effective internal funding framework

Objectives of Internal Funding Policy

• Consistent liquidity pricing behaviour amongst business lines
• Removing interest-rate risk from the business lines
• Including the bank’s cost of liquidity in product pricing
• Driving balance sheet shape and direction for assets and liabilities
• The correct internal pricing regime for the bank

The Cost of Funds

• Constructing the bank’s internal funding curve
• Different reference funding curves (Libor, OIS, etc)
• Marginal unsecured curve
• Secured funding curve
• Weighted average cost of funds (WACF) curve

Setting the Correct Market-Implied Term Funds Transfer Pricing (FTP) Curve

• Business best-practice approach to constructing the risky yield curve
• Proxies for the internal funding curve input

FTP and Liquidity Management

• Pricing liquidity via the FTP process
• Costs of raising liquidity correctly

Pricing Liquidity

• The concept of the term liquidity premium (TLP)

Treasury Op Model, FTP and Balance Sheet Management 

• Integrating FTP into balance sheet management
• FTP centre as cost centre or profit centre
• FTP across different business lines: alternative approaches

FTP and Liability Strategy

• Integrating FTP strategy into ALM and liability strategy
• Driving liabilities-raising behaviour through the FTP mechanism
• A dynamic FTP regime for changing yield curve environments

Funding Policies

• Banking book
• Trading book
• Derivatives