Rural Commercial Bank Internal Funds Transfer Pricing Model Study

Under the arrival of the era of interest rates liberalization and its fierce development,the operation of Rural Commercial Banks has been more dramatically impacted.Whereupon the theoretical system of internal funds transfer pricing,regarded as one of the tools of daily management in major commercial banks,has been used by Rural Commercial Banks step by step.However,because of the factors,such as the short periodof establishment,uncompleted system,out-of-date software and hardware,besides the national interest rates liberalization not perfectly implemented,the internal funds transfer pricing system is not used properly in Rural Commercial Banks.Lots of institutions just simply apply the widely popular mode such as single funding pool mode or duration matching mode.This article focuses on the current Rural Commercial Banks,and also analyses on three major pricing models: single funding pool mode,multiple funding pools,duration matching model,as well as the classic internal funding pricing model in Rural Commercial Banks.A new pricing model is introduced basing on the combination of single funding pool and duration matching model,which includes five timing differentiation design phase: optimization headquarter internal funds allocation,benchmark pricing measurement model: actual pricing system design,pricing operation and pricing adjustment.The optimization headquarter internal funds allocation mainly considers the general operational targets,operational profit measurement and avoiding risks from headquarter point of view.The benchmark pricing measurement model is to design the measurement model,which is based on current Rural Commercial Banks,and considers current statistics of basic data related to national owned-big banks measurement model.The actual pricing system design is based on the requirements of organization,setting up departments and assessment in current Rural Commercial Banks,which is used to design the proper pricing system.Since the Rural Commercial Banks organization structure and management model are different with national owned banks,the pricing system has to be adjusted accordingly.The pricing operation mainly uses the optimized pricing model and methods to operate internal pricing in Rural Commercial Banks.Hence the Nash equilibrium concept is introduced.The price adjustment is mainly based on actual ability of profitability and risk control,then headquarter may set up pricingadjustment to each branches.Finally,these five timing differentiation designs are programmed and applied in a Rural Commercial Bank.During the application,this new brand pricing model is able to simulate the process of internal funds transfer in Rural Commercial Banks.The generated FTP reports is valuable tor this Rural Commercial Bank in practical work.Meanwhile,this new model means a lot to those financial organizations who applied internal funds transfer valuation.