|
|
|
The KnowCo Funds Transfer Pricing (KFTP) Application
The KnowCo Funds Transfer Pricing application (‘KFTP’) supports financial institutions in pricing
liquidity risk in a manner compliant with internationally-recognised good practice
KFTP enables the user to:
- Define FTP curves, based on selected yield curves and adding credit, buffer cost and any other required premiums to those curves, per currency
- Define time buckets for the curves
- Define rules for allocating FTP curves to accounts based on the currency and account type or portfolio
- Establish and allocate the cost of any liquidity buffer
- Calculate FTP interest, across the balance sheet
- Report on the difference between FTP and actual interest yielded/demanded by assets and liabilities respectively
In short, KFTP allows the user to more actively manage the firm’s liquidity risk profile over time
by adjusting interest rates per currency, per portfolio and per time bucket to optimise future liquidity gaps.
KFTP Reports
KFTP produces a number of reports for the user to manage and monitor FTP costs effectively, including:
- FTP buffer cost: the actual yield per asset item per currency on buffer assets, the alternative asset yield and the difference between the two in percentage and monetary terms
- Weighted average maturity per portfolio and per account: this is an important tool in explaining to the businesses generating and using liquidity why accounts and portfolios achieve the FTP pricing allocated to them
- Past and current FTP rates per time bucket, and their components (1. yield curve, 2. credit spread and 3. buffer cost, plus any other user-defined premiums) per Portfolio/Currency assets.
|
|
|
|
|
Arrange a KFTP Demo
“A bank should incorporate liquidity costs, benefits and risks in the internal pricing, performance measurement
and new product approval process for all significant business activities (both on- and off-balance sheet),
thereby aligning the risk-taking incentives of individual business lines with the liquidity risk exposures
their activities create for the bank as a whole.”
Principle 4 of the Basel Committee’s Principles for Sound Liquidity Risk Management and Supervision, September 2008
We would be pleased to give you a demo of KFTP. Click here to arrange a demo.
|
|