Specify Interest Details Type, Event Details, and Rate Details

Specify Event Details

Events and the Basis Amount

The term Event can be explained concerning a deal. A deal goes through different stages in its life cycle, such as:

Deal Booking
Money Settlement of Deal
Reversal of Deal
Cancellation of Deal

Each stage is referred to as an Event in Oracle Banking Treasury Management. The event at which you would like to associate the interest component, being defined, to a contract is referred to as the Association Event. The basis on which interest is calculated is referred to as the Basis Amount. For instance, a coupon can be based on the current face value of a security. When building an interesting class, you have to specify the tag associated with the Basis Amount.

Accrual Required

Choose to accrue the interests due to a contract. To accrue the interest payable on a contract, choose the ‘Accrual Required’ option.

Rate Type

The interests paid on contracts can be at a Fixed Rate or based on a Floating Rate. If you indicate that interests should be calculated based on a Floating Rate, you must specify the ‘Periodic’ Floating Rate Type. For all contracts maintained under products, associated with a class, the interest will be by default calculated using the specified Rate type.

Specify Rate Details

Default Rate Code

Interest payable on contracts would be calculated at specific rates. When building an interest component, you have to specify the rate at which the interest should be computed. When associating a rate code (that you have maintained in the Rate Codes Maintenance screen) with the interest component that you are building, the rates corresponding to the code will be used to compute interest. When maintaining a contract, you can choose to waive the rate code altogether or amend the properties of the code to suit the security. If you allow amendment of a rate code, you can specify if you would like to allow the rate code amendment after the association event. You can also allow the amendment of the rate value (corresponding to a rate code).

Default Tenor

Each rate code is associated with a tenor. For instance, you have a Rate Code ‘LIBOR’. You can link any number of tenor codes to the same rate code.

Table 14-4 Codes table

Tenor	Description
1W	One week rate
2W	Two week rate
2M	Two months rate
6M	Six months rate
1Y	One year rate

When building an interest component, you can specify a Tenor Code that you would like to associate, with the Floating Interest Rate Code. Interests for contracts (maintained under a product) will be calculated using the rate corresponding to the Rate Code and the Tenor Code.

Other Details

Default Waiver

Check this box to indicate that even if charge is computed, it should not be liquidated.

Allow Rate Type Amendment

Check this box, to allow rate type amendment

Allow Rate Code Amendment

Check this box, to allow rate code amendment

Amend after Association

If you would like to allow the amendment after association of a rule for a charge component, check this box. Once checked the system will allow you to modify the rule after the association event is triggered for the linked contract.

Allow Rate Amendment

Check this box, to allow rate amendment.

Negative Interest Allowed

Check this box to allow negative interest for interest class. You can check this box only if interest class is maintained for Money Market, Corporate Deposit or Bills and Collections module and ‘Main Component’ flag is checked.

If negative interest is allowed for an interest class, system will generate a negative interest component on saving the interest class. Negative Interest Class name is derived as Main Interest Class Code_N. If the length of main interest class code is more than 8, then the system truncates the interest class code to first eight characters and adds ‘_N”.

Specify the Rate Revision Preferences Details

During product creation and modification, user can change RFR preferences upon default of interest class.

Note:

When you select or clear the RFR flag, respective Rate Code is mapped.

Caution:

System allows you to map only one RFR Interest class as main component for a product.

Partial Impairment of Bonds

The system supports the partial impairment on Bonds for Bank type portfolio depending on price movement in Month end.

You can manually change the status of the Bond from NORM to LOSS where LOSS status is allowed for Partial Impairment at Securities Product screen.

The Accounting entries will be posted where accounting heads maintained for LOSS status for Partial Impairment (Target GL) in Securities Status Properties screen as part of STCH event. The STCH event will be posted at Portfolio Definition screen level. The above status change entries will be performed when the Impairment Type is 'GL Transfer'. The system will Transfer the loss percentage and un-accrued interest to Target GL, this maintenance can be done at Securities Status Property screen.

If you select the Stop Accrual at the product level, then the interest accrual gets stopped after status change. The accrued interest for the current period will be reversed if the Reverse Accrual is selected.

The system supports MTM realized and unrealized revaluation. When there is a reduction in market price compared to deal price, the bond is marked for partial impairment. You can modify the status of the bond manually in Securities Status Properties screen. The Realized revaluation amount posted before impairment will be reversed from the affected position when 'Reverse Reval' option is enabled under Realized Reval at Product level. During manual status change, you can select the execution process to be ‘Online’ or ‘Scheduled’.

If ‘Online’ option is selected, then the status change and accounting entries will be posted immediately once the record is saved and authorized.
If ‘Scheduled‘ option is selected, you can select the effective date greater than Application date, where the status change event and accounting entries will be posted as part of EOD processing when system reaches that effective date.

You can select the Impairment percent in Securities Manual Status Change screen during manual status change, the impaired percentage amount will be booked for Loss entry and remaining amount will be in current status. If deal nominal amount is USD 100 and 70% is input against the impairment percent field, system will book the Loss entry for USD 70 in the New status and entries will be against the Target GL. USD 30 will be not affected as part of manual status change and remains in the same current status GL. If impairment Allowed check-box is not selected at security product definition screen, an instrument is defined for this preference with a portfolio having position and holdings. Perform status change for this security by providing the impairment percentage. Post save system will do GL transfer for 100 percentage, and update the impairment field with value 100.

If you perform manual status change for the instrument defined with status preference having “Impairment allowed” checked and Book impairment type, and provide the impairment percentage and online execution. System will immediately post the IMPR entry with accounting entries.

If you want the status change to happen in future, then scheduled process can be selected. You will have to provide the effective date as Future date and give the impairment percentage. IMPR event will be processed as part of EOD with accounting entries.

The accounting entries will be as follows:

Table 14-5 IMPR Event Accounting

Accounting Roles	Amount Tag	Dr/Cr
SEC DISC TBACRD	DEAL_DISCNT_AMT	Dr
SEC PREM TBACRD	DEAL_PREMIUMAMT	Cr
SEC ASSET GL	DEAL_NOMINALAMT	Cr
IMPR_LOSS	IMPR_DEP_LOSS	Dr

When there is an increase in Price movement, the status of the Bonds can be changed and accounting entries posted as part of partial impairment can be reversed. If you select the option 'Exclude Impairment Reversal during end of year' at the product level, then the bank will realized the loss impacted as part of partial impairment.

For Unrealized revaluation already system has the handling to post the reversal entry during next period as part of RRVL event.