Oracle
Transfer Pricing, the first commercially available funds
transfer pricing system, continues to be an industry standard
for determining the account-level spread earned on assets
and liabilities, and the spread earned as a result of interest
rate exposure. Oracle Transfer Pricing supports a comprehensive
range of transfer pricing methodologies, based on industry
best practices, to calculate accurate results at the lowest
available level of detail. As one of Oracle’s financial
services applications, now part of the Oracle E-Business
Suite, Oracle Transfer Pricing, together with Oracle Profitability
Manager, offers a comprehensive solution for the calculation,
analysis, and reporting of profitability.
Transfer
Pricing as a Profit-Enriching Tool.
The transfer pricing process isolates the four major sources
of a bank’s margin: • The spread earned on assets
• The spread earned on liabilities • The spread
earned or lost as a result of interest rate exposure •
The spread earned or lost as a result of embedded options
Measuring and managing isolated elements of the interest
margin offers tremendous profit opportunities. By separating
the components of net interest income, Oracle Transfer Pricing
isolates rate risk into your funding center, where it can
be centrally managed. In turn, business units are held accountable
for what they can control: pricing and profitability. Armed
with this highly accurate information, you can make solid,
supportable decisions that lead to increased success for
your organization.
Precision
and Flexibility at the Lowest Level
Oracle Transfer Pricing assigns a transfer rate to each
instrument by applying the transfer pricing technique you
specify for that instrument type. There are nine methodologies
to choose from, enabling you to set the correct level of
precision for each account. These methodologies incorporate
user-driven transfer pricing yield curves, characteristics
of each account, and customized prepayment expectations
into the final transfer rate. Multiple transfer rates allow
you to isolate individual components of the transfer rate
(such as basis risk, option spread, and liquidity premiums),
which enables you to better understand the risk profile
of individual instruments, selected portfolios, and the
entire organization. By using this information, you can
allocate costs in accordance with the risk taken by various
business operations.
