How Bank can Control Internal Transfer Rate -4

The TCI should be calculated and stored in the SI as the implementation of the operation to be exploited in the management tools of the trade act. This would also ensure consistency of refunds to the dashboard used by senior management. Of course, this also requires a vertical integration of all impacted reference: Product size / dimension structure / customer dimension. This target is difficult to achieve in the short term, however, according to their priorities and constraints, banks can already move to intermediate systems. For example, the establishment of an exchange system between the distribution and the calculation system (ALM) would ensure the inclusion of the real characteristics in the calculation of TCI. Although the TCI is not preserved, it can be recalculated to the same using the same parameters (market data, contract data), known at the time of the request. Thus, the joint calculations a priori / a posteriori would be consistent.

Other improvements could be made to the establishment of a TCI approach. For example, the business may wish to have a global vision allowing him to integrate the risk profile of the customer in managing the commercial act.
Propose systems to measure the performance of activity based on risk and include operating costs would also be an area for improvement.

The work of coherence and sophistication will make TCI a real management tool for profitability and not just a constraint for a single measurement.

How Bank can Control Internal Transfer Rate -3

To ensure proper use and membership of teams, schools must conduct a deep reflection on their process of diffusion of ICT and develop their information and their organization to ensure consistency of refunds. The objective is to obtain a homogeneous and TCI shared by all players.

Efforts should be worn on the establishment of committees (awards committee or other governing body) that would go all the advantages / disadvantages of a product and this on all axes. Indeed it is important to highlight the difficulty or ease of marketing a product: product carrier, product not meeting customer expectations, discontinued product, but also the financial aspects: produces little or very profitable ...

This information will then be shared by all to define a more accurate pricing. The bonus / penalty that can be set up in response to market developments with a view to remain competitive in the standards of the place must be clear communication activities to facilitate their adoption. The aim is to involve all stakeholders in the pricing and impose the CIT, not as a constraint but as a guarantee of profitability indicators like credit risk.

These elements will allow policy makers to reorient trade policy or financial institution on the basis of cyclical and structural analysis while ensuring compliance with the policy set.

Course to ensure the homogeneity of the refunds should be defined processes to close the dashboard rather than in their broadcasts, but in their preparation. To do the bridges between the different functions must be implemented, supported by clear governance principles.

How Bank can Control Internal Transfer Rate -2

In practice, agencies often complain of excessive levels. They face the price war generated a better distribution of offers on the market and often use the waiver system to maintain or expand their portfolios client. Salespeople do not see a sign in the TCI arguing that the competitiveness of a TCI unit operation does not enhance the profitability of the customer relationship as a whole.

The profit margin is very important to implement the development strategy of the Bank. Yet the results are often heterogeneous because of the multiplicity of stakeholders and the synchronism of the calculations. Thus during the formation of the commercial offer, the account manager is based on a grid giving along different axes (rate type, maturity, options ...) the rate of the product. This grid does not know the actual margin generated by the operation. This is calculated a posteriori (stock) with the exact characteristics of the operation. This discrepancy explains in part the discrepancies in the results presented by the commercial world versus the financial sphere.


Senior management must have coherent and unique dashboards. This coherence can only come from a good articulation of the calculations a priori / a posteriori. It is therefore necessary to develop processes and tools that do not just needed for each function (ALM, Controlling, development) but that cover, in aggregate, all the needs.

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.