Cost Allocation Among Customers in Corporate Banking

The banks have been facing various pressures pushing their performance down. They need to make proper decisions about their customers to keep or even increase it. Customer profitability is being an important information source for such decisions. Operating costs are significant part of such profitability. Their proper allocation is crucial to reach a proper value. Theoretically, the best way of allocation seems to be an Activity based costing system. However, it might be too costly and clumsy in corporate banking which treats each customer individually. Therefore the article is elaborating its easier alternative Time-driven Activity. The main advantage of it is being less demanding while keeping cause-and-effect allocation principle.