Announcing the following FTP Workshops for Q4 2018:
Now that interest are finally moving up, many banks are finding that their processes for computing and forecasting product- and business segment-level profitability are producing more noise than signal. Despite many years of relative margin stability, FTP methodologies which do not properly hedge interest and liquidity risk in loans and deposits are suddenly making it extremely difficult to manage earnings. Furthermore, improperly constructed FTP methodologies create unnecessary and unproductive tension between Treasury and the business units when mutual support and collaboration is required more than ever. Sound familiar? If so, then this workshop is for you!
Please join me for an exciting 2-day session where we explore the purpose and practice of FTP. We will discuss the use of FTP to identity, price and transfer interest rate risk and liquidity risk from the lending and deposit gathering business units to a central mismatch center, and we will explain how to develop a funding curve which reflects contemporaneous hedging costs (it has economic integrity) as well as the meaning of the earnings in the mismatch center (they are not an arbitrary tax on business unit earnings!).
We will also address the unique challenge of modeling NMDs, and we specifically acknowledge the behavioral inflection point where excess liquidity evaporates. I am excited to present my NMD model which has an embedded FTP engine that is designed to ensure that the treatment of deposits is consistent in all risk AND profitability management exercises. Most importantly, the FTP methodology within the NMD Model has been specifically designed to produce FTP spread stability when deposit providers actually deliver deposits with the behavioral characteristics they have promised. (If you can’t say this about your approach to managing NMDs, then you must acknowledge there there is no way to hold the deposit gatherers accountable for the quality of the deposits they deliver.) Imagine how accountability and incentive compatibility compel activities that are actually good for the bank; risk and profitability management exercises take on a whole new meaning when rewards and punishments are not arbitrary, especially when interest rates are moving up!
Come see why my clients have come to believe that FTP is the most overlooked and under-appreciated business management process in banking. Regardless of size or charter type, FTP is mandatory if you want to explain the level and volatility of earnings at any level of granularity.
I will also share numerous lessons I have learned in almost 25 years of working with banks, credit unions and their regulators from around the globe. Don’t miss this opportunity to learn how to dramatically improve the story of how your depository institution makes money!
For more information about the workshop, see Funds Transfer Pricing: The Key to Effective Risk and Profitability Management.
I hope to see you soon.