7.4.2 Ad-hoc Fees

• This fees is collected from the borrower on an ad-hoc manner and need not be associated with a schedule or defined upfront.
• This fees is applicable at the Facility, Tranche or Drawdown levels.
• This fees is usually for flat amounts. Even in cases where they are rate based, the basis amount for calculation may not be based on a fixed value. Hence, you need to manually calculate and input a flat fee amount. These fees can be amortized.
• The following are the types of Ad-hoc fees.
  • Administration Fee
  • Amendment Fee
  • Others (that is, Waiver Fee)
• You should be able to collect such fee with current date, back value date, and future value date as well.
• In case of future dated fees there needs to be a provision to amend/cancel the fee before the value date.
• In case of Bilateral Committed or Syndication contract where Bank A is a Participant, the fee amount is captured only for own share.
• In case of Syndication contract where Bank A is an Agent, the fee amount can be captured as Agency Fee applicable to Bank A only or a global amount that can be shared among all participants or select few. In case where it is a global amount, the system should calculate the own share and other participants share of the fee and propagate it accordingly.
• During input of fees where Bank A is the agent, you should be able to provide the income sharing ratio for the ad hoc fee component to be shared with the Participants (including self-participants).
• You should be allowed to select if amortization of the fees is to be applied or not. If the fee is to be amortized, then you should be able to input the start and end dates during which such fee component should be amortized.
• In case the contract is one where Bank A is an agent and the fee is applied on Tranche or Drawdown, amortization should only apply to the own share of the contract only.
• On authorization of the ad hoc fee, the system is expected to trigger the necessary events and post accounting entries based on the product set up.
• In case of current and back value dated fees, the accounting entries should get posted immediately.
• In case of future value dated fees, it is expected that the accounting entries are posted on the future value date. In case of future value dated entries, the standard holiday handling process for future dated events should be applied.
• In case of a future dated Ad hoc fee, if the borrower does an early payment of a drawdown, the system should display an error message to cancel the uninitiated future dated fee.
• Since this is an ad hoc fee, billing notice generation in advance are not applicable.
• Based on the SSI set up, the following SWIFT messages should be supported for sharing the fees with the various participants.
  • Customer Transfer (MT103)
  • Customer Transfer with Cover (MT103 with MT202COV)
  • Bank Transfer (MT 202)
• While SSIs that are maintained at the contract level are expected to be defaulted at the time of collecting the ad hoc fee, you should be allowed to modify the SSI information defaulted.
• The system should allow the same ad hoc fee component to be collected on different dates. For example, The ad hoc fee, Credit Agreement Amendment fee may be collected on 10-Aug-19 and 25-Sep-20.
• The system should allow input of the same fee component to be collected on these two different dates.
• All other fee related functionality with respect to accrual, reversal of accrual and stop accrual with respect to life cycle of the contracts should be applicable to Ad hoc fees as well.

Limitations

• For self participant, reversal of ad-hoc fees does not propagate from LB to OL. You need to manually perform reversal on OL.
• For recurring ad-hoc fees, overlapping of the schedules are not allowed.
• In a single transaction different fee collection modes (Arrears and Advance) are not allowed.
• For facility, ad-hoc fees status change is not applicable.