Funds transfer pricing: a study for the financial market

Abstract

Each time more companies adopt types of decentralized controls, attributing to the managers of lower levels, a bigger autonomy and responsibility. As a consequence, the determination of the Funds Transfer Pricing – FTP, becomes an important tool, once it contributes to a better allocation of funds among the business units of an organization and, besides, assisting the evaluation performance process of the responsibility centers. This study aims to demonstrate like the determination of an interest rate for internal transference of resources can influence the business-oriented lines´ performance analyses of a financial institution, which considers its agencies or headquarters activities as profit centers. For this purpose, a numerical simulation with the aforementioned tool will be presented to prove the main impacts in the performance evaluation. The simulations had shown that the results reached at the conclusion that the application of Funds Transfer Pricing allowed a better evaluation of the two business units of the Bank when compared with the defined interest rates used by the market.