Plain English
When one group entity places surplus cash with another — whether inside a cash pool or as a standalone deposit — the receiving entity should pay a deposit rate similar to what a bank would pay on comparable short-term deposits, not the higher rate a borrower would pay for a loan. Confusing deposit and loan benchmarks is one of the most common technical errors in intra-group cash management pricing.
Technical definition
Deposit rate benchmarking applies the CUP method to intercompany short-term cash placements by reference to comparable bank deposit rates, money market rates or short-term commercial paper yields appropriate to the currency, tenor and credit standing of the deposit-taking entity, distinguished from loan interest benchmarking which reflects the borrower's credit risk from the lender's perspective.
Why it matters
Depositor entities are frequently under-compensated when their placements are priced using loan-rate logic reduced by an arbitrary margin rather than genuine deposit market data, understating their taxable interest income.
How it works in practice
- 01Identify the depositor entity and the tenor/currency of the placement.
- 02Source comparable bank deposit rates or money market instrument yields for that currency and tenor.
- 03Adjust for the credit standing of the deposit-taking entity (the borrower of the cash), since deposit rates reflect the taker's risk.
- 04Cross-check against the deposit-taking entity's own external short-term borrowing costs.
- 05Document the resulting rate separately from any loan benchmarking analysis.
Worked example
Deposit versus loan rate mix-up corrected
A subsidiary places EUR 10m on 30-day intercompany deposit with the group's finance company. Initially priced using the finance company's five-year loan borrowing rate of 5.5% less 200bps, giving 3.5%, this overstated what a genuine deposit should pay. Benchmarking against 30-day EUR money market and bank deposit rates for an entity of the finance company's credit standing shows a rate of 2.8%–3.1%. The deposit is repriced to 3.0%, reducing the depositor's interest income by EUR 50,000 annually but bringing it in line with genuine market deposit terms.
Common mistakes
- Deriving deposit rates by simply discounting the group's loan rate rather than sourcing genuine deposit market data.
- Ignoring tenor mismatches between the actual deposit period and the comparable data used.
- Failing to reflect the deposit-taking entity's own credit standing in the rate.
Audit red flags
- Deposit rate identical to, or a fixed spread off, an unrelated loan rate with no independent deposit market evidence.
- No tenor-matching in the comparable data used.
- Persistent, large deposit balances priced as if short-term when they behave as term funding.
Documentation & data
Documents to hold
- Deposit rate benchmarking study, separate from loan benchmarking.
- Comparable money market or bank deposit data.
- Credit assessment of the deposit-taking entity.
Data you need
- Money market and bank deposit rate data by currency and tenor.
- Deposit-taking entity's credit standing.
- Actual deposit balance and tenor history.
Who owns this internally: External advisors typically run the benchmarking; in-house tax reviews and applies the resulting rate.
Jurisdiction notes
- OECD
- Chapter X treats deposit pricing as a distinct exercise from loan pricing within the broader cash pooling and treasury guidance.
- France
- Specific administrative guidance addresses appropriate deposit rate benchmarks for cash pool depositor entities.
Notes by role
Advisors & consultants
Keep a separate benchmarking workflow and data source for deposits versus loans — treating them as mirror images of the same analysis is a common but avoidable error.
In-house tax teams
Check whether depositor entities are being systematically under-compensated, which understates their local taxable income.
Frequently asked
- Can loan and deposit rates simply mirror each other with a spread?
- Not reliably — deposit and loan markets have different depth, participants and rate drivers, so independent benchmarking is preferred.
- Does the depositor's own credit rating matter?
- Less than the deposit-taker's rating, since the deposit-taker is effectively the 'borrower' of the cash and bears the repayment obligation.
Sources & status
- Primary source
OECD Transfer Pricing Guidelines, Chapter X, paras 10.133–10.138
OECD, 2022
Reference material only, not advice on a specific fact pattern. Reviewed 2026-06-30.
Careers
How this shows up in the job
Explicitly distinguishing deposit from loan benchmarking is a small but telling detail that signals genuine technical fluency.
Careers in transfer pricing