Liquidity risk pricing is one of the key challenges facing financial institutions today. In this document, we explore how banks can effectively approach Liquidity Risk Pricing (LRP), with a particular focus on the role of the Term Liquidity Premium (TLP) in pricing frameworks and strategic decision-making.

Throughout the presentation, we analyze the main components of liquidity pricing — from regulatory costs linked to ratios such as NSFR and LCR to the central role of Treasury as the “bank of the bank.” We also address one of the industry’s most relevant debates: how to strike the right balance between financial theory and real-world business constraints.

In addition, the document explores different methodologies for defining the TLP, comparing the most commonly used market proxies and their limitations, while highlighting key factors such as balance sheet structure, funding sources, and market price availability.

As a practical solution, we introduce a blended approach to curve construction, combining multiple data sources to achieve more robust and market-aligned pricing. This approach enhances competitiveness, supports balance sheet optimization, and avoids distortions in cost allocation.

Finally, we address the challenges of implementing these methodologies within FTP (Funds Transfer Pricing) frameworks, emphasizing the importance of data integration, granularity, and alignment between Treasury and Finance.

Download the full presentation to discover how to move toward a more accurate, transparent, and business-aligned liquidity pricing model.