AboutRobert Hanzel Expertise I can answer questions regarding most areas of consumer and commercial finance. I have extensive experience regarding various types of loans (commercial, consumer, USDA, SBA 504, SBA 7A, foreign), many investment vehicles, credit, economics, and banking. I am not an expert regarding tax structures and other tax issues and thus would not recommend asking tax related questions
Experience Over 11 years Financial, Investigative, and Legal experience including loan review, due diligence, financial analysis, collections, and risk management. I have managed Credit Administration, Loan Administration, Credit Analysis, Credit Review, Liquidation Departments, Collections, and workouts
Organizations Both the Risk Management Association and the Bank Administration Institute.
Education/Credentials I have obtained both my Credit Risk Certification from the Risk Management Association and a Loan Review Certification from the Bank Administration Institute.
Question How do you calculate the average cost of funds of a bank and assigned it to the different areas, in order to measure the interest rate of corporate and consumer banking.
Answer Different banks may apply different forumalas to calcuate their cost of funds, but it normally boils down to a weighted formula containing the funds borrowered and their independant rates. When a bank makes a loan to you, a portion of the funds for that loan come from the deposits they have on hand, and the other portion can come from money that they borrower from the government. When you have a savings account, you earn a certain percentage. This would be the banks costs of funds on that portion that they lend out, because that is what it costs to lend it. Keep in mind that not only the interest they are paying is included. It costs money to have a teller take the money, to have lights on in the branch, to service that account, etc. This is all included in the cost of funds. The money that is borrower from the government has an interest rate applied to it and that is the majority of the cost for that portion. When you hear that the "Fed" is raising rates, this is normally the rate they are increasing. The cost to the banks to borrower money. The banks than increase their rates to the customers causing an interest rate increase overall. I hope this helps!
