Treasury teams use Funds Transfer Pricing (FTP) to allocate internal funding costs and benefits across different business divisions within a financial institution.
The FTP Allocation Architecture
[Deposits Division] ---> Generates excess cash ---> [Treasury Center] ---> Funds loans ---> [Lending Division]
  (Receives an internal credit benefit)                                         (Charged an internal funding cost)

FTP functions as an internal pricing system:
  • Deposits Division: Credited by the internal treasury center for gathering stable, low-cost customer deposits that can fund the wider enterprise.
  • Lending Division: Charged by the treasury center for the capital needed to fund new commercial loans, ensuring product profitability calculations factor in the true cost of funding and liquidity risks.
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