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Funds Transfer Pricing - London

Incisive Training
Course summary
Length: 2 days
Price: 2,199 GBP excl. VAT
Location: London
Course type: Open / Scheduled

Course Description

Funds Transfer Pricing Training

Funds Transfer Pricing - 2 day Course in London

This course is designed to investigate the pressure added by the Basel III regulations to the banks which are aimed at maintaining a buffer that enables fund transfer price (FTP) to be adjusted to the credit risk of specific assets.

FTP is a regulatory requirement and tool used in the management of firms' balance sheet structure that takes into account liquidity risk, maturity transformation and interest rate risk. Due to increased costs of funding and illiquidity, firms have had to reassess transfer pricing policies in recent years, and regulators expect a precise assessment of costs, benefits and risks. These assessments are required to be added into all of the product pricing, performance measurement and approval process of all new products. This course will give participants an ideal platform for discussion and learning how to apply the processes of FTP to business functions.

Suitability - Who should attend?

The course is aimed at those working in Liquidity, Treasury and Asset/Liability management within banks and other financial institutions.

Employees that work in the following positions will benefit from the course:

  • Chief Risk Officers
  • Chief Financial Officers
  • Heads of Asset/Liability Management
  • Balance Sheet Managers
  • Head of Liquidity
  • Market Risk Managers
  • Heads of Risk Modelling
  • Heads of Risk Strategy
  • Heads of Financial Reporting
  • Heads of Financial Reporting
  • Basel III Reporter
  • Compliance Manager
  • Heads of Regulatory Development
  • Treasurers
  • Internal Auditor
  • Capital Advisor
  • Risk/Financial Analysts

Training Course Content

Course content is as follows:

Day One

Delivered by Marcel Hutter, Owner, Dendrit Risk Management

Introduction into FTP 

  • Deal making profit centre versus treasury
    • FTP contributions of Profit centre, Treasury, Responsibility centre
    • Outside rate agreed upon between the bank and the customer
    • Pure FTP rates & spreads and their attribution
  • Technical transformations of yield curves
    • Term structures & discounting factors
    • Annualized yields, compounding & day count methods
    • Terms, time, rates, spreads
  • Discussions of spread attributions to treasury
    • Non-strategic/non-option spreads
      • Liquidity spread
      • Institution specific spread
      • Boni/mali spread
      • Treasury spread
      • Credit risk spread
    • Strategic/option spreads
      • Behaviour spread
      • Option adjusted spread

How to assign or map FTP rates and spreads

  • FTP assignment methods
  • Par rate
  • With RS cycle compounding
  • With IP cycle compounding
  • Strip balance (principal cash flows)
  • Strip balance (principal and interest cash flows)
  • Principal cash flows weighted term
  • Cash flows weighted term
  • Rate term given by duration
  • Direct assignment
  • Direct mapping of FTP rates and spreads
    • Method 1: Hard coded (software editor)
    • Method 2: Delivered by the bank (interface)

FTP rate & spread investigations on different cash flow & event patterns and applied demonstrations within diverse software tools

  • Theory and the effect of 
    • Premium/discount
    • Resetting the rates (variable)
    • Instalments

  • Focus on contract types
    • Non-maturities (saving accounts) => Replication
    • Maturity types (bonds, credits)
    • Stocks, Commodities, Indices
    • Derivative instruments
  • Practical work within the software
    • Direct mapping of FTP rates & spreads
      • Example plain vanilla bond
      • Principal at maturity
      • Fixed/variable
      • Rates & spreads delivered by the financial institution itself
    • Rate assignment FTP methods
      • Example annuity instalments
      • Typical annuity cash flow pattern lying on cycles
      • Fixed/variable
      • Rates generated as a function of the applied FTP assignment method
    • FTP behaviour spread generation
      • Example of an easy contract
      • Discussion of the prepayment assumption
      • FTP behaviour spread generated as a function of the assumed prepayment pattern
    • FTP option spread generation
      • Example of a bond-option
      • Typical embedded call/put option
      • Option adjusted spread generated as a function of the embedded option

Discussion from different perspectives

  • Liquidity
  • ALM (Sensitivity/NPV) with special focus on par rate
  • Accounting (P&L)

Day Two

Integrating FTP into the overall liquidity policy framework

  • Real cost of LCR and NSFR
  • Relationship between FTP and the liquidity buffer
  • Capital adequacy: introducing NSFR
  • Liability side of the balance sheet: how LCR and NSFR play a part
    • Equity
    • Sight deposits
    • Customer deposits
    • Bond issues
  • Components the liquidity cost
  • Avoiding treasury's FTP account becoming loss-making

Speaker: Fitz Drummond, Vice President Treasury, Deutsche

    Applying the funding cost to the business

    • The cost of funds
    • Building your internal funding framework
    • FTP as an Interest Rate Risk management tool
    • FTP as a profitability management tool
    • Budgeting/ Forecasting/ Profitability
    • Business Units
    • Governance/ Accountability requirements
      • Break-funding charges
      • Clarifying risk ownership
      • Identifying accountability (or lack thereof)

    Speaker: Christian Hasenclever, Leader Strategic Asset and Liability Management - Treasury, Norddeutsche Landesbank

    Managing and optimising your balance sheet

    • Balance Sheet Challenges
      • Managing liquidity in the context of the leverage ratio
    • Balance Sheet Structure
      • Managing collateral under FVA, CVA frameworks
      • Deploying and pricing efficient funding products
      • Optimising liquidity buffer management
    • Efficient Resource Allocation
      • Allocating returns / costs associated with liquidity resources
      • Achieving aligned balance sheet and cost / return allocation

    Funding policies

    • Banking book
    • Securities trading book
    • Derivatives book

    Expenses

    The cost of this course is £2,199 + VAT per participant. Enquire about early bird discount.

    In-house options are also available, contact Incisive Training for more information.

    Provider: Incisive Training

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