Forty Points

Start with what the floor is for. It is not there to protect the rate card from the market. It is there to stop the bank lending below what a loan costs to hold — the funding, the expected loss, the capital, the cost of running it. Above that line, a price is a commercial judgment. Below it, the bank is paying to keep a customer, which can be right, but has to be decided as that, by name.

That is why A, the most natural answer, is the most expensive. Twenty points looks like prudence: the bank has moved, and kept some of its margin. What the client hears is that the old margin was never cost; it was rent, and more of it is available to whoever asks. Torrent Bay will be back with the next sheet, and so will every client the story reaches. C defends a card set eighteen months ago against a signed price from this year, and will lose a nine-year client whose loan, on the evidence, still pays. D trades the one thing that is not yours to trade: the structure is a credit judgment about a warehouse, and a price-setter who gives it away to close a pricing argument has made someone else's decision for them.

The senior banker in the price-setter's chair chooses B, and signs three things at once. The full forty, because a competitor's signed term sheet is the best evidence of a market price a bank ever gets, and a partial match only prolongs the auction. A check, written down, that the matched margin still covers what the loan costs to hold — thinner than before, but above the line. And the reason, recorded against the exception: this client, this sheet, this market. The log of reasons is how a bank finds out, a year later, whether its card is the market's price or its own habit.

The how of it matters to the relationship manager too. Matched in full and quickly, the price stops being the subject, and the conversation on Friday can be about the only question left — the structure — which is where the bank's real judgment about this client lives.

A floor protects the bank from its own costs, not from the market. Match a real price in full, write down why, and let credit keep the structure.