Chinese Commercial Banks' Internal Funds Transfer Pricing Study

With the financial market of China opening, China' s commercial bank is facing more and more challenges, which are not only from the competitions between banks, but also from the internal management requirement. Under the requirement of capital adequacy and interest rate marketization, application of funds transfer pricing is main trend, for this tool is able to assist banks in China in enhancing the profit and improving the management towards a higher level.Based on the basic concept of funds transfer pricing system, as well as its operation mechanism in bank management, this paper first analyzes the main funds transfer pricing methodologies, then conducts an investigation in the importance and necessary of fund transfer pricing by given the current management actuality of banks in China, and builds the application process of funds transfer pricing grounded on the principle of FTP system. According to the studies, FTP methodologies are selected and adjusted carefully for commercial banks in China. Recommendations on implementing FTP system are put forward as well.