Funds transfer pricing in banking: the cashflow and capital congruent market opportunity in the marktzinsmethode
E. IJskes Additional contact information E. IJskes: Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics
This paper aims at describing the Marktzinsmethode as it developed in German literature. Attention will be paid to the reasons for developing a market-based funds transfer pricing system. The opportunity principle will be introduced as a means of assigning interest income. As a result of the use of the opportunity principle three sources of interest income are recognized: interest income from loans, deposits, and maturity mismatch, as will be illustrated with an example.