4.23 Calculating Reserve

Reserve allocation or provisioning needs to be done for buy trades that have not been sold for a period that exceeds a pre-defined number of days. Reserve calculation preferences are captured in the Portfolio Maintenance screen. If the number of days up to which a buy deal remains un-sold exceeds the Reserve Days specified, reserve calculation gets activated.

The following maintenances need to be done for the calculation of reserve:

• CUSIP Rating maintenance
• Mapping of the ratings from different sources
• Bid/Ask factor maintenance
• Age factor maintenance

For more details on these maintenances, refer the section Maintaining details specific to SLT module in this user manual.

For each buy deal booked in SLT, Oracle Banking Corporate Lending checks if the difference between the current system date and the trade booking date exceeds the Reserve Days. If it exceeds, then the system computes the reserve as follows:

Reserve = Trade Amount * Bid/Ask Factor * Age Factor

FIFO logic is used to identify trades for which the reserve computation is applicable i.e, buy deals are set off against the sell deals that happen, if any, in a FIFO manner, so that only the remaining buy trades are applicable for reserve calculation.

Reserve calculation happens as part of the EOD batch. For calculating number of days, Calendar days are considered and not working days.

Accounting entries for reserve calculation are posted during month-end as part of RESV event. If the month-end happens to be a holiday, the entries are posted on the previous working date. But the computation is done for the period including the month-end.