An annual capital charge may misprice the month in which origination changes

If the capital charge is set once a year, origination that deviates may make it inadequate before its next update.

With the capital charge given as a number, the credit area would price loans without resolving each transaction jointly with the balance-sheet core. If a month's origination materially changes marginal capital consumption, by the third week the charge may no longer be the right one. The problem may lie in the cadence, in the methodology, or in both.

Under that assumption, what is missing is a trigger that reopens the calculation when origination deviates, and merging credit with the balance sheet would be the wrong response. The boundary between 2 systems holds as long as the trigger can keep up with the effect of one system on the prices of the other.

That is the boundary criterion of a Decision System within Execution on Decision Systems.

If a month's origination deviates, who in your bank checks whether the marginal cost of capital has changed and triggers its update?

The full Perspective, with its sources, is available on request.