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Spread the risk
ME PoV Summer 2015 issue
The Middle East is experiencing an ever more unstable geo-political climate that is challenging bank management to calculate the risks of long-term business service offerings, thus challenging the banking sector to enhance its performance management competencies through better management experience, stronger and efficient credit controls through a unified information technology system/platform and processes to better collate credit data, portfolio management and performance.
The banking sector worldwide, and especially in the Middle East, faces the challenge of sustainable profitability. Banks are facing a multitude of regulatory requirements to conform with Basel III, putting pressure on capital adequacy ratios in the form of increased capital requirements from shareholders.
Current historically low interest rates, increased competition and the fast growth of Islamic finance products, which rather than transfer risk, work on a system of shared risk, are eroding traditional profit margins through increasing compliance costs and expenditure on more flexible and innovative lending products.
Adopting the Fund Transfer Pricing (FTP) model is key to providing banks’ management and employees with the operational and performance tools to better manage their profitability reporting via their own branches, customers, officers, products, segments and channels, in addition to improving their overall assets and liability management (ALM), creating a competitive advantage and strategic benefits.