2.11.17 Collateral Fee Processing

This topic provides information on Collateral fee processing of collateral Maintenance.

Collateral fee supports below types of fee processing.

• Recurring Fees
• Event Based Fees

You can perform the following for collateral fee

• Configure multiple fees for a collateral.
• Waive fees selected out of one or more number of fees at collateral level during creation.
• Define collateral fees as a fixed amount, percentage or user input fees.
• Define the collateral fee structure as 'Slab' or 'Tier'.
• Fee liquidation related accounting entries are passed on fee collection as configured – FLIQ event.
• Fee accrual/amortization is done based on the configuration opted – FACR event.
• Collect the fee automatically on cycle end date (Arrears) for recurring fees (and then based on the frequency) and on happening of an event (Event based fee).
• Fee Type ‘USERINPUT’ and ‘AMOUNT’, the value specified as fee is considered for the whole liquidation cycle (frequency) and accrued accordingly based on the day basis and other parameters.
• For example:
  • Fee amount specified 2400
  • Accrual frequency is daily
  • Liquidation frequency is Monthly and Days in month 30
  • Day basis is Actual/Actual,
  • Fee accrued per day is 2400/30 = 80
• Liquidation method ‘Advance’ is not applicable for collateral fees.
• Any upfront fee can be collected through an event based fee.
• Day basis is applicable and is used for fee calculation and accrual/amortization of both amount and percentage based fees.
• RULE_INC, RULE_REC, and so on accounting roles are generated on Fee rule creation.
• Fee currency is same as the collateral currency.

Recurring Fee

• Recurring fees can be of following types:
  • Collateral maintenance fees
  • Collateral inspection fees
  • Collateral custody fees and so on
• Recurring fees is collected based on liquidation frequency configured.
• Recurring fees is calculated and accrued based on underlying collateral value as on the date and as per accrual frequency configured.
• It is possible to stop a recurring fee from collection based on effective end date given.
• You can collect recurring fees only using auto collection methods.
• Holiday processing for fees is applicable only to recurring fees if opted and is handled as below.

  			Holiday
  1		Liquidation Freq	Ignore Holidays	Holiday Level	Movement	Collateral Creation Date	Next Liquidation Date	Holiday	Actual Liquidation Date*
  		Monthly	Yes	NA	NA	02- Aug	02-Sep	Yes	02-Sep
  		Monthly	No	Local/Currency/Both	Forward	02- Aug	02-Sep	Yes	03-Sep
  		Monthly	No	Local/Currency/Both	Backward	02- Aug	02-Sep	Yes	01-Sep

2		Holiday
	Liquidation Freq	Ignore Holidays	Holiday Level	Movement	Collateral Creation Date	Next Liquidation Date	Holiday	Actual Liquidation Date*	Cascade Schedules
	Monthly	No	Local/Currency/Both	Forward	02- Aug	No	Yes	03- Sep	Yes
	Monthly	No	Local/Currency/Both	Backward	02- Aug	No	Yes	01- Sep	No
3		Holiday
	Liquidation Freq	Ignore Holidays	Holiday Level	Movement	Across Month	Collateral Creation Date	Next Liquidation Date	Holiday	Actual Liquidation Date*
	Monthly	No	Local/Currency/Both	Forward	Yes	30- Aug	30- Sep	Yes	01-Oct
	Monthly	No	Local/Currency/Both	Forward	No	30- Aug	30- Sep	Yes	29-Oct
4		Holiday
	Liquidation Freq	Ignore Holidays	Holiday Level	Movement	Across Month	Collateral Creation Date	Next Liquidation Date	Holiday	Actual Liquidation Date*
	Monthly	No	Local/Currency/Both	Backward	Yes	01- Aug	01- Sep	Yes	31- Aug
	Monthly	No	Local/Currency/Both	Backward	No	01- Aug	01- Sep	Yes	02- Sep

Assuming not a holiday. If holiday then again the holiday processing as configured is applicable.

Event Based Fee

Event based fees is usually of the following type:

– Collateral creation fees

– Collateral extension fee (when collateral end date is modified and extended further)

– Collateral expiry fee (when end date is crossed and collateral value becomes zero)

– Collateral reactivation fee (when collateral is reactivated post suspension)

– Collateral suspension (when collateral is suspended)

• Event based fee are collected when collateral status gets updated, like active (on creation), extended (when collateral end date is modified and extended further), expired (when end date is crossed and collateral value becomes zero), reactivated (when collateral is reactivated post suspension), suspended (when collateral is suspended).
• Event based fees is linked to collateral at the time of creation itself, but gets triggered on happening of status update.
• Event based fee becomes applicable as many number of times as the collateral achieves a particular status.
• For example - collateral suspension fee gets triggered as and when multiple suspension takes place.
• Collateral fees of type ‘Event Based Fee’ is always be a one-time fee but recurring multiple times as and when a life cycle event is triggered for a collateral.
• Collateral Fees of type ’Event Based Fee’ can have liquidation frequency as only ‘One Time’.
• It is possible to collect ’Event Based Fee’ only automatically.
• For collateral fees of type ‘Event Based Fee’, the calculation and accrual are based on the underlying basis amounts - ‘Collateral Value’ (Limit Contribution’ and ‘Available Amount’ are not applicable).
• Collateral fees of type ‘event based fee’ can have accrual frequency as one-time and liquidation frequency as one-time.

Since an ‘Event Based Fee’ gets triggered on happening of a certain collateral life cycle event, in that case holiday processing is not applicable. In other way it is based on holiday parameter maintained at GEDPARAM level.