top of page

The Cost of Money

Financial institutions rely on a variety of funding sources to meet their liquidity needs, which can vary depending on market conditions and the institution's risk profile. The cost of these funding sources can be significant, and it is essential to accurately determine the cost of money in order to set appropriate prices and manage liquidity risk. This case study describes how Barbican Consulting helped a client to evaluate their FTP methodology to ensure it captured all relevant costs, was fair to treasury and the rest of the business, and was understood by staff.


The client had developed their own methodology for FTP but recognised the need for an expert evaluation. Barbican Consulting was engaged to conduct a desk-top review of the methodology, ensuring that it was proportionate and met regulatory requirements. The client understood the importance of a rigorous challenge process and wanted to ensure that their FTP policy was robust.

The Risk

A poorly implemented FTP policy can lead to a number of problems, including increased liquidity risk, regulatory scrutiny, and business written at the wrong price. It is therefore essential to ensure that the FTP policy captures all relevant costs, is fair to all areas of the business, and is understood by staff.

The Proposal

Barbican Consulting conducted a detailed review of the client's FTP methodology, focusing on the role of FTP, the cost of liquidity, the effect on treasury of FTP methodology, product pricing, margins, the effect on business units, new products, board MI, and IT integration. The report included recommendations graded by priority and recommended implementation periods. The approach allowed the client to save money on the original development work and only pay for independent advice required, with the report being delivered within a relatively short deadline pending a board review.

The Outcome

The report provided the client with a detailed evaluation of their FTP methodology, highlighting areas where improvements could be made. The recommendations included changes to the pricing of products to reflect the cost of liquidity, improvements to board MI to ensure transparency and understanding, and changes to IT systems to support the implementation of the new methodology. The report was presented to the board for review, and the recommendations were accepted and implemented over the recommended period.

bottom of page