2.3.3 Handle Interest, Charge and Tax Components

In Oracle Banking Treasury Management, you can build interest, charge and tax components, upfront. When defining a product, you merely have to attach the required components. Thus, security, maintained under a security product, acquires the components associated with the security product. Similarly, portfolios and deals acquire the components associated with the respective products they involve.

The following example illustrates the advantage of defining a component upfront.

The following transaction taxes apply on all the securities deals that you enter into:

A Stock Exchange tax

Local tax 1 - applicable on the deal amount

Local tax 2 – an additional tax

In Oracle Banking Treasury Management, each of these taxes is referred to as a ‘component’ of the deals that you enter into.

In Oracle Banking Treasury Management, you can build each of these components upfront. Since these taxes apply to all deals, you can associate the tax components to all the deal products that you maintain at your bank. Deals involving a product acquire the components defined for the product.

The advantage is clear: you do not have to define these taxes every time you enter into a securities deal.

Build Interest and Charge Classes

A class is a specific type of Interest or Charge component. A quarterly coupon paid on the current face value is an example of an interest component. A charge levied on every extra Statement of Holdings provided is an example of a charge component. When building a class, you can identify:

• The Charge Rule (in case of a charge class)
• The event at which you would like to associate the component to a security
• The application event (for a charge class)
• The liquidation event (for a charge class)
• The basis amount on which the coupon is paid. Typically, this is on the current face value of a security (for an interest class)
• The rate type (for an interest class)
• The default rate code (for an interest class)
• The default tenor (for an interest class)

These details default to the products with which you associate the class. For instance, security maintained under a product acquires the interest components associated with the product. By building classes, and associating them to products, you remarkably save time and effort.

Build Tax Classes

With the Securities module of Oracle Banking Treasury Management, you can process two kinds of tax:

• Issuer tax (charged on the coupon or cash dividend paid by the issuer)
• Transaction tax (local taxes, for example)

Issuer tax for security is calculated on the basis of the Issuer Tax Scheme associated with the product that the security involves. The transaction tax for a securities deal is calculated on the basis of the Transaction Tax Scheme associated with the product that the deal involves. (A tax class is a specific type of Issuer or Transaction tax. A tax scheme is a set of Issuer or Transaction tax classes.)