Doha Bank is one of the largest commercial banks in the State of Qatar. It was incorporated in 1978. Doha Bank provides individuals, corporate and institutional clients across Qatar and internationally. The Bank has total asset of USD 20.36 billion with its loan portfolio of USD 13.96 billion and deposit portfolio of USD 12.42 billion. Doha bank has banking operations in Kuwait, UAE and has recently started its operations in India.

Implementation of FTP

Background Doha bank was looking for an application to measure and monitor the profitability at various dimensions such as Branch, Department and Relationship Manager. Bank was not following any advanced method of Transfer pricing to measure profitability. Transfer price was calculated manually using traditional method by measuring income and expenses booked in various business units.

Challenges

In the absence of a transfer pricing system, bank was unable to measure the profitability of products, branches and relationship managers accurately. Hence bank was not able to incentivize right products, branch and relationship managers. Bank did not have any transfer price rate associated with products and hence actual interest rate of product was never compared to analyze the profitability.

Solution

After successful implementation of BALM, Surya was the right choice for the implementation of Fund Transfer Pricing solution and hence project was awarded to Surya.

Surya’s new FTP (3.0) solution allows bank to calculate transfer pricing at account level and hence allows multi-dimensional profitability analysis. The System supports Matched maturity method. It supports association of various market and contract curves to derive the transfer price curves for a product. It also allows bank to add proper spread for credit risk, liquidity risk, interest risk, ALCO spread, et al. while deriving the curve, which is be defined and set by the bank.

A Brief on FTP implementation

Surya implemented its new FTP (version 3.0) application to help bank to measure above mentioned requirements. The system is configured to calculate FTP at account level using matched maturity concept.

Results

• Construction of FTP curve using Market and internal sources using Boot strapping methodology
• Facility to setup FTP rate based on parameters like product, currency, residual maturity, contractual maturity
• Application allows users to FTP at different frequencies such as daily, weekly, monthly, quarterly, yearly
• Cost allocation module is also delivered as part of FTP implementation