Using different interest rate curves in customer business and ALM/risk management may lead to “management mistakes” as well as adverse effects on the bank result. Another issue are the liquidity costs of the pool banks contained in the EURIBOR/LIBOR rates, which make it impossible to cleanly calculate and manage interest and liquidity risk. The solution is to price the basis swap costs of the individual basis interest curves into the corresponding products and to adopt the EONIA swap curve as interest transfer price. The article deals with these bank management issues and shows a workable solution illustrated with calculation examples.

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