1. Secondary Loan Trading
  2. Annexure – Accounting Entries
  3. Introduction
  4. Maintaining SLT Accounting Entries

7.1.7 Maintaining SLT Accounting Entries

  • You can reclass the below mentioned balances from the existing long position GL to the new short position GL for CBNA/CNAI and CFPI positions.
    • Funded Inventory
    • Premium / Discount
    • Mark to Market
  • You can create conversion process for the below.
    • To bifurcate single trade receivable-payable account into separate receivable and payable accounts for CFPI positions.
    • To replace existing payable and receivable accounts with new GL accounts for CBNA and CNAI positions.
  1. Changes are done in trading module to move the below mentioned balances under new liability ledger accounts.
    Balance Type Amount to be Reclassed/Moved to the Liability GL
    Funded Inventory Total short position* Funded% as of system date
    Premium/Discount (1 – WAC) * Total short position
    Mark to Market (Market Price – WAC) * Total short position
  2. During end of day, Oracle Banking Corporate Lending reclass the short positions for each balance and post the accounting entries under position contract in the below events.
    Balance Type Event
    Funded Inventory PRCL - Position Reclass (new event)
    Premium/Discount PRCL
    Mark to Market REVL (Existing revaluation event)
    • A new process is introduced in SLT end of day batch (LTAUTDLY). The new process posts the new set of entries for PRCL and REVL under position contract as mentioned below, if the position is short for the CUSIP.
    If funded balance exists in LB then reclass entries are posted for funded inventory under PRCL event.
    • [Absolute of short position* funded% as of system date] debits the existing asset GL and credit the new liability GL.
      • Funded % is computed as [(Total Drawdown Outstanding / Transfer available amount) * Trade amount].
      • Total Drawdown outstanding is the sum of all outstanding drawdown balances including LC drawdowns in tranche currency as of the system date.
      • Transfer available amount = [Tranche available amount + Drawdown outstanding amount] as of system date.
    • If WAC is not 100, then premium / discount entries are posted under PRCL event as part of reclass.
      • If WAC < 100 then [absolute of short position * (1-WAC)] is credited to the existing P/D GL and new P/D GL is debited.
      • If WAC > 100 then [absolute of short position * (1-WAC)] debits the existing P/D GL and new P/D GL is credited
  3. Entries of PRCL are reversed next day as part of RPCL (Reversal of Position Reclass) event with negative amount.
  4. RPCL event can be configured in Oracle Banking Corporate Lending such that the reversal can happen in Beginning of Day or End of Day (in EOTI).
    PRCL Example for Funded Inventory and Premium Discount
    Date Trade Activity Total Position Trade Price WAC Market Price
    Day 1 Trade1: Buy 1M 1,000,000.00 98 98 98
    Day 2 Trade2: Sell 2M -1,000,000.00 98.2 98.2 98.2
    • Day 1 EOD – No entries are posted as the position is positive; not short.
    • Day 2 EOD – PRCL entries are posted as below.
      Transfer Available Tranche Outstanding Funded %
      1,000,000.00 800,000.00 80%
      D/C Amount Tag Accounting Role Amount
      Dr TRDT-INV-RCL TRDT-FND-BAL 800,000.00
      Cr TRDT-INV-RCL TRDT-SPOS-INV 800,000.00
      Dr TRDT-PRMRCL-INC TRDT-PRMDSC-BAL 18,000.00
      Cr TRDT-PRMRCL-INC TRDT-SH-PRMDSC 18,000.00
      If position is not short then the existing REVL entries are posted; otherwise REVL entries are posted for the short position based on the new proposed accounting entries.
    Example for MTM
    Date Trade Activity Total Position Trade Price WAC Market Price
    Day1 Trade1: Buy 1M 1,000,000.00 98 98 98
    Day2 Market price change     98 98.15
    Day3 Trade2: Sell 2M -1,000,000.00 98.2 98.2 98.2
    Day4 Market price change -1,000,000.00 98.2 98.2 98.5
    Day5 Market price change     98.2 97.8
    • Day 2 EOD - Existing REVL entries are posted as below; the entries are reversed on day 3 BOD. Amount is in negative during RRVL.
      D/C Amount Tag Accounting Role Amount
      Dr UNRLZD-PRFT UNREAL_MTM_OFF 1,500.00
      Cr UNRLZD-PRFT UNREAL_MTM_INC 1,500.00
    • Day 3 EOD – MTM entries are not posted as WAC and market price are same. Price change also happened on day 3.
    • Day 4 EOD - New proposed MTM entries are posted as the position is short. Loss entries are posted though market price is greater than WAC because of short position. Entries are reversed in Day 5 BOD. Amount is in negative during RRVL.
      D/C Amount Tag Accounting Role Amount
      Dr UNRLZD-SH-LOSS UNREAL_MTM_EXP 3,000.00
      Cr UNRLZD-SH-LOSS UNREAL_SMTM_BAL 3,000.00
    • Day 5 EOD - New proposed MTM entries are posted for profit as market price is lesser than WAC and the position is short.
      D/C Amount Tag Accounting Role Amount
      Dr UNRLZD-SH-PRFT UNREAL_SMTM_BAL 4,000.00
      Cr UNRLZD-SH-PRFT UNREAL_MTM_INC 4,000.00
  5. During beginning of day, previous day entries are reversed for PRCL and REVL events. RPCL (Reversal of position reclass) is the reversal event for PRCL. Existing RRVL is used to post reversal entries for MTM position. Accounting entries are not required to be maintained for the reversal events.
  6. CUSIP currency is used for PRCL, REVL, RRVL and RPCL events.
  7. The changes are applicable only for the SLT trades involving Par and Distress desks.

    Note:

    CLP trades are not applicable.

Parent topic: Introduction