A Bank within a Bank: How a Commercial Bank's Treasury Function Affects the Interest Rates Set for Loans and Deposits

12 Pages Posted: 20 Jun 2015

Date Written: June 18, 2015

Abstract

Banks determine the interest rates on loans and deposits through an internal pricing approach that seeks to take account of the relevant costs and risks of their business. This article focuses on ‘funds transfer pricing’ (FTP), a key component of banks’ internal pricing methodologies. It discusses issues in some banks’ FTP practices, the impacts of economic and regulatory developments on FTP, and some potential implications for monetary and financial stability.

Suggested Citation

Cadamagnani, Fabrizio and Harimohan, Rashmi and Tangri, Kumar, A Bank within a Bank: How a Commercial Bank's Treasury Function Affects the Interest Rates Set for Loans and Deposits (June 18, 2015). Bank of England Quarterly Bulletin 2015 Q2, Available at SSRN: https://ssrn.com/abstract=2620605

Fabrizio Cadamagnani (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Rashmi Harimohan

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Kumar Tangri

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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