Saturday, August 6, 2011
How Bank can Control Internal Transfer Rate -1
Today the majority of banks have developed an approach by internal transfer rates. The approach differs depending on the size, the activity of institutions and the role of the ALM (Asset Liability Management or ALM).
However, she always intended to measure the contribution of the financial and commercial sphere to the MNI (and GNP).
The TCI is the center of trade between these two spheres, it is the price at which business units, respectively, puts or refinancing their resources and jobs to the ALM.
The TCI is usually built for a loan from the backing of the rate of "flux flow" of the operation, taking into account the refinancing costs, plus the cost of contract options (caps, floors ...) or customer (option prepayment ...). Thus, the performance of transactions by trading is not affected by changes in the market because the risk is transferred to ALM.
CFOs have responded to the problems of development of ICT and the processes that are derived are now under control. However, refunds are made which are not always effective to control the performance of the Bank.
To do this, banks must transform TCI management tool of the act by providing a commercial return consistent at all levels (commercial, financial, decision-maker).
Ideally ICT must be used at the proposal stage to project the commercial profitability of the customer. Indeed to drive the business effectively, we must take into account all the elements that run with the client's portfolio. But if the TCI enables sales to act on the elements they control (as the financial risks are carried by the ALM), it does not enhance the overall customer or business. Similarly, agency officials must be able to make the same tests at their level.