3.2.2 Borrower Facility Product

At the first level, you must define a borrower facility product for borrower facility contracts. The example given below will illustrate this.

Example

Your bank has decided to make available the facility of entering into a loan syndication contract with customers. You can define a product for this facility. Let us assume that the product you define has been given the code SYN1. Now, any syndication facility contracts that are entered into by your bank with any borrowing customer can be processed against this product.

You can define more than one syndication facility product. For instance, you can define a general syndication product, and a special syndication product.

Let us suppose that you have entered into a syndication contract with one of your customers, Mr. John Baldwin. After identifying the participants for a tranche under this contract, you want the participants in a tranche to fulfill their commitments five days in advance, before each drawdown schedule under the tranche falls due. You could define a general syndication facility product to enter a contract of this nature, specifying the required number of notice days as five.

Your bank has also entered into an agreement with one of your corporate customers, Equinox Consultants. Let us suppose that, for this contract you do not need to notify the participants in advance of a schedule. You could define a special syndication facility product to enter agreements of this nature, with the number of notice days as zero.