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I am creating a RAROC/FTP model for different loan types on a credit union balance sheet. I am stuck on how to calculate the funding benefit of equity that would be netted out of my cost of funds benchmark. An example below shows the funding benefit @ 0.17%. Does anyone know where that may be sourced from or what calc method is being used to arrive at that result?

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You're essentially calculating the Weighted Average Cost of Capital.

Target Capital Ratio * Risk Weight * Cost of Funds = Funding Benefit of equity %

Ex: Risk weight = 75% Capital Ratio = 10% Cost of Funds = 5%

Funding Benefit of Equity = 38bps

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