3. N etting Payments across modules

Oracle FLEXCUBE allows you to ‘net’ contracts pertaining to different modules provided they satisfy certain conditions. The Netting facility is useful at the time of contract settlement. You can opt to net two or more contracts at the time of settlement if the contracts are:

Linked to the same counterparty (customer)
Have the same Value Date
If your bank has signed a netting agreement with the counterparty

Thus if four contracts for a given counterparty settle on the same day and if your bank has signed a netting agreement with the counterparty, then instead of four separate payment messages a single payment message will be sent to the counterparty.

This chapter contains the following sections:

Section 3.1, "Maintenance required for Netting Payments in Oracle FLEXCUBE"
Section 3.2, "Maintenance required for FT upload"
Section 3.3, "Generating the Netted FT"

3.1 Maintenance required for Netting Payments in Oracle FLEXCUBE

To net entries pertaining to deals involving a specific counterparty in Oracle FLEXCUBE, requires certain basic information to be maintained. The information that needs to be captured includes the following:

Capturing the netting agreement related details
Maintaining netting related information at the contract level
Maintenance pertaining to the Route for settling payments

3.2 Maintenance required for FT upload

This section contains the following topics:

Section 3.2.1, "Capturing the Agreement related details"
Section 3.2.2, "Maintaining netting related information at the contract level"
Section 3.2.3, "Maintenance pertaining to the Route for settling payments"

3.2.1 Capturing the Agreement related details

To net deals in Oracle FLEXCUBE, you must enter into a netting agreement with the concerned counterparty. You can do this through the ‘Netting Agreement Maintenance’ screen. You can invoke this screen by typing ‘STDNTMNT’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

These details will be used to net all deals that you enter into with the counterparty.

Customer Number

You must identify the CIF ID assigned to the Counterparty for whom you are maintaining the netting agreement details.

When you choose to net contracts at the beginning of the day, all contracts specified for netting will be netted for every customer for whom you have maintained netting details.

Agreement Reference Number

Each netting agreement record that you maintain should be identified with a unique reference number in Oracle FLEXCUBE. You can specify a unique number to identify each agreement.

Indicating the Details of the Agreement

As part of specifying the details of the agreement you will have to capture the following information:

The period for which the netting agreement is valid
The Outgoing FT product, which is to be used to send the payment details to the customer
The netting suspense account into which the entries are to be posted during contract processing

Assume you have entered into three separate FX, MM and DV deals with Cavillieri and Barrett Finance Corporation (the counterparty). You bank has also signed a netting agreement with the counterparty whereby you have indicated that entries involving contracts for the counterparty should be netted.

As a result, while posting the entries during contract processing, the accounting function will replace the customer account with the netting suspense account and the entries will be posted as follows:

Debit/Credit	Entries	Netting account value
Dr.	FXBOT GL	a
Cr.	CSA1	a (CSA1 = Cust Suspense Acct)

Debit/Credit	Entries	Netting account value
Dr.	CSA1	b (CSA1 = Cust Suspense Acct)
Cr.	AssetGL	b

Debit/Credit	Entries	Netting account value
Dr.	IRS_Bot_GL	c
Cr.	CSA1	c (CSA1 = Cust Suspense Acct)

The system will not generate payment messages for the three individual contracts. However, during the EOD/BOD processing a single FT will be generated. The payment message will be sent through this FT. As a result of the payment contract the following set of entries will be passed.

Debit/Credit	Entries	Netting account value
Dr.	Cust Suspense Acct	a + c - b
Cr.	CustAcct1	a + c - b -- the actual customer account

Note

The netted payment message will be generated Settlement Message Days (maintained in the Currency Definition screen) before the due date. The Settlement Messages (SGEN) event will be triggered as usual, but the individual payment messages will not be generated for counterparties with whom you have a netting agreement.

3.2.1.1 Specifying Product Restrictions for the Counterparty

If you choose not to make the netting feature applicable on transactions involving specific products thereby establishing certain controls you can maintain a Product Restriction list for each counterparty.

To maintain a list of allowed/disallowed products, click on the ‘Product Restriction’ tab in this screen.

Choosing the list type

You can specify product restrictions in the form of allowed lists or disallowed lists.

If you create an ‘allowed’ list of products, entries involving transactions for the particular counterparty and product combination will be netted. On the other hand, if you maintain a ‘disallowed’ list, the entries involving the respective product and counterparty combination will not be netted.

You can indicate whether you are maintaining an allowed or a disallowed list type by choosing the appropriate option.

3.2.2 Maintaining netting related information at the contract level

In addition to maintaining a netting agreement for each counterparty, you have to specify whether or not the contract is under the netting agreement for each contract involving the counterparty.

You can do so by enabling the Netting option in the Settlements sub-screen of the Contract Online screen while processing contracts involving the customer.

The various components (Amount Tags) of the transaction like commission, interest, tax, charges etc will be displayed in this screen. Ensure that you enable this option for each component of the transaction.

Refer section Account Details of Capturing Account Details for explanation on Settlement Details Screen.

3.2.3 Maintenance pertaining to the Route for settling payments

You can maintain the settlement preferences of a customer or a bank in the ‘Settlement Instructions Maintenance’ screen. You can invoke this screen by typing ‘ISDINSTN’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

You will have to maintain a set of instructions for the Netting (NT) module. While sending the payment message for the netted FT the default settlement route that you have maintained for the parties involved in this module will be used.

Refer section Capturing Settlement Preferences for a Customer for explanation on Settlement Instruction Screen.

3.3 Generating the Netted FT

This section contains the following topics:

Section 3.3.1, "Viewing Details of Netted Contracts"

3.3.1 Viewing Details of Netted Contracts

You can generate the netted FT at any time of the day by executing a batch program. The Netting Across Modules program is available under the Batch Program option in the Application Browser.

Upon executing this program successfully you will be intimated with the message as ‘Netting across Modules Successful’.

You can view details of netted contracts through the ‘Netting Across Modules Detailed’ screen. You can invoke this screen by typing ‘ISDNETNG’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

In this screen, you will be able to view details of all Contracts Under Netting for the following parameters:

The Netting Reference Number
The Customer involved in the transactions
The Value Date of the transactions
The netted amount
The code of the branch in which the transactions were processed
The currency of the transactions
The debit/credit indicator – indicating whether the amount was debited or credited to the ‘Net’ Account

Querying for Details of the Netted Contracts

You will also be able to perform queries on the Netted Amount and the Netting Reference Number through the ‘Netting Across Modules Summary’ (ISSNETNG) screen.

In this screen, Double Click on the record to view details of the payment contract

3. Netting Payments across modules