FMS Financial Managers Society; authored by Bryan Ridgway and Kenneth M. Levey
April 19, 2016
For the better part of two decades, financial institutions have watched their net interest margins diminish in response to a host of factors, including a historically low interest rate environment, a flattening of the yield curve, the growth of deposit accounts, shrinking loan portfolios and a shift in balance sheet structures.
While margins appear to be stabilizing, analysts do not expect significant improvements any time soon, even with the expected slow increases in interest rates. This margin compression has been the norm for so long that many bankers simply resign themselves to it, and fewer still take proactive measures to ensure that they are utilizing all possible approaches to fight for every basis point of margin. Of those that do, funds transfer pricing (FTP) is proving itself as an effective cornerstone of their successful margin management strategy. So how can bankers leverage the components of FTP to benefit their institutions?