The Forecast Illusion: Breaking Silos to Reclaim Financial Clarity

In this provocative session, Craig explores why forecasts in financial institutions are often maligned and misunderstood—not because they’re inherently broken, but because they’re built in silos.

Banks typically rely on two parallel processes: balance sheet management (BSM), which focuses on net interest income under various rate scenarios, and the budget process, which aims to predict net income by volume and performance.

The problem is not the process itself but the lack of alignment and shared intelligence between them.

Treasury teams might feed budget assumptions into BSM that lack real volume logic, while FP&A teams often rely on vague directional scenarios, operating more like guesswork than strategic analysis.

Instead of clairvoyance, forecasters need structured inputs—particularly shared economic drivers and one key tool: the Funds Transfer Pricing (FTP) rate.

FTP serves as a rational backbone, allowing teams to reverse-engineer deal profitability or project future outcomes with purpose rather than instinct.

Craig argues that FTP shouldn't be limited to past performance measurement—it must be embedded throughout the entire lifecycle of a deal, including underwriting and pricing.

Moving away from lazy heuristics and spreadsheet shortcuts, institutions must introduce checks and balances, forcing the forecast to pass through scenario-tested logic and embedded cost drivers.

This means transforming FTP from a back-office stamp into a front-line decision enabler.

The real challenge is cultural. Silos persist because it’s easier not to collaborate. But a forecast that doesn’t integrate interest rate, capital, non-interest revenue, and cost assumptions across business lines is not just useless—it’s dangerous.

Rebuilding forecasts means realigning incentives, establishing operational bridges between treasury and finance, and creating a dynamic process that adapts in both forward and reverse, driven by core financial truths.