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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Funds transfer pricing (FTP)

What is funds transfer pricing, and how does it set a loan's real cost?

ONE OF 366 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Funds transfer pricing is the internal rate at which a bank's treasury charges lending teams for the money they lend and credits deposit teams for the money they raise, usually matched to each product's term and repricing. It moves interest rate and liquidity risk to treasury, so each business is judged on the margin it controls. A five-year fixed loan at 6.5%, charged at a five-year transfer rate of 5.0%, earns 1.5% before credit and running costs; charging it at a cheaper one-year rate would show a richer margin and leave no one owning the rate risk.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// WHAT IT IS NOT

A bank's cost of funds is the blended price of all its funding; a transfer price is the internal charge for one loan or deposit, set for its own term, and can sit above or below that blend.

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