Fiduciary Application

This application is used by dealers to place fiduciary deposits made by customers with other banks. The placement contract is generated automatically from the FD.FID.ORDERS made by customers, the dealer must decide which bank the funds are to be placed with and the interest rate applicable.

Fiduciary Orders are automatically pooled by the system and once all orders in a group are approved by the dealer, the placement will be generated. Pooling is achieved by matching orders on Value date, Maturity date and currency. The amount of the placement is the total of the pooled orders in that group, and can only be amended by changing the orders. The dealer can modify the maturity date within a window defined on the FD.PARAMETER file.

Two different types of Fiduciary placement are possible ; FIXED term placements where the funds are placed for a pre-determined length of time with a fixed maturity date, and NOTICE placements where funds are placed for an unspecified length of time, but with a period of notice that must be given by the customer of the associated deposit prior to reimbursement of funds.

The principal and interest rate cannot be changed during the life of FIXED contract. The principal can be increased and decreased on NOTICE contracts by the customer of the deposit, and the interest rate changes are notified by the fiduciary bank. Any change in principal or a request for reimbursement of a NOTICE contract must be approved by the dealer before becoming effective. Interest is received at the maturity date of Fiduciary placements, and additionally at specified settlement dates on NOTICE contracts. The rate and frequency of interest payment is determined by the bank that the Funds are placed with.

POOLING OF ORDERS

Orders will be pooled whenever possible. Orders are matched by Currency, Value Date and Maturity Date to form a pool group. Pool groups can be split into separate groups if required. The dealer must approve each order in a group before the Fiduciary placement contract is automatically created based on the total amount of the pool group. Once the first order in a group has been approved, any new orders entered will be assigned a new group.

For notice contracts, where it is possible to pool orders to an existing placement (as defined on FD.PARAMETER), the pool group for existing placements will be checked first. An order will match the existing placement group if the currency and number of days notice match and the value date of the order is greater than or equal to the value date of the placement, and the order is NOT back valued. Once an order is authorised, a pooling group number will be assigned. The contract will be checked against existing FD.POOL.GROUP records to find a match, if automatic pooling is required for the order. If no match is found, or the order is not to be pooled, a new group number will be assigned.

If a customer has specified banks where funds are NOT to be placed, or alternatively preferred banks for the placement, the order will not be automatically pooled, but can be included in a specific group by the dealer if requested. Any special conditions relating to an order, entered in the dealer instructions field, will also prevent an order from being automatically pooled. Details of preferred and excluded banks for the placement of funds are held on the file FD.CUST.DETAILS.

If an error is made in entry of the order, this can be corrected if the order has not been approved by the dealer. If an order has been approved but not yet placed by the dealer, the approval can be cancelled, the correction made, and the order can then be re-approved.

Once the placement has been made by the dealer, amendment of the details of principal, currency, value date and maturity date can only be made by reversing the FD.FIDUCIARY (placement) contract which will then allow all orders linked to the placement to be amended. In this case all orders in will be re-pooled, and must be approved by the dealer again.

ACCOUNTING

All accounting entries are passed on the appropriate value date. No entries are generated on the customer deposit side of the fiduciary until the placement has been authorised. Cash flow is always updated for the next forward movement of principal and interest. Drawdown entries are raised online where the value date of the contract is back valued or today. All other accounting entries are raised during the batch processing with the exception of reversal of the contract.

DELIVERY

Swift messages are generated for the following activities :

The format and type of message produced by the above events is determined by the FD.ADVICES and FD.ACTIVITY applications. The option of generating a deal slip for each of the above activities is provided in the FD.ACTIVITY application.

FD.FID.ORDER

This application is used by account officers to record details of Fiduciary deposits on behalf of customers of the bank. The account officer will enter the details of the customer requesting the deposit, and the details of the deposit required.

Two different types of Fiduciary deposit may be requested ; FIXED term deposits where the funds are deposited for a pre-determined length of time with a fixed maturity date, and NOTICE deposits where funds are deposited for an unspecified length of time, but with a period of notice that must be given prior to reimbursement of funds.

The principal deposited for FIXED contracts cannot be changed during the life of the contract, and the depositor will receive a fixed rate of interest. The principal deposited for NOTICE contracts can be increased and decreased during the life of the contract, and the interest rate can be variable. Once authorised, the Orders taken by the account officer will be given to the dealer to place with another bank. Contracts will be ‘pooled’ automatically by matching orders with the same currency, value and maturity dates to form a single deposit to be placed by the dealer. The automatic pooling of orders can be overridden if requested by the account officer, or if the customer has specific requirements for the placement of funds.

Once an order is accepted by the dealer, the amount, currency, value and maturity dates cannot be amended by the account officer. Requests for principal increase/decrease, and contract reimbursement on NOTICE contracts must be approved by the dealer after entry by the account officer.

Interest is paid at the maturity date of Fiduciary deposits, and additionally at specified settlement dates on NOTICE contracts. The rate and frequency of interest payment is determined by the bank that the Funds are placed with.

A commission can be taken in ADVANCE at the start of the deposit, or in ARREARS, at maturity, and each principal movement and interest settlement. Optional charges can also be taken at the start of the contract. Customers will usually sign a mandate stating that the Withholding tax will not be deducted from the amount of interest earn, however if no mandate is held, the withholding tax can be deducted from the customer at interest settlement if required.

Customers can automatically renew FIXED fiduciary deposits after the maturity of the original deposit. The renewed deposit can be for the same amount of principal, or the principal plus interest earn (less commission if taken at maturity). The renewed deposit will be generated a pre-determined number of days before the maturity of the current deposit.

POOLING OF ORDERS

Orders will be pooled whenever possible. Orders are matched by Currency, Value Date and Maturity Date to form a pool group. Pool groups can be split into separate groups if required. The dealer must approve each order in a group before the Fiduciary placement contract is automatically created based on the total amount of the pool group. Once the first order in a group has been approved, any new orders entered will be assigned a new group.

For notice contracts, where it is possible to pool orders to an existing placement (as defined on FD.PARAMETER), the pool group for existing placements will be checked first. An order will match the existing placement group if the currency and number of days notice match and the value date of the order is greater than or equal to the value date of the placement, and the order is NOT back valued.

Once an order is authorised, a pooling group number will be assigned. The contract will be checked against existing FD.POOL.GROUP records to find a match, if automatic pooling is required for the order. If no match is found, or the order is not to be pooled, a new group number will be assigned.

If a customer has specified banks where funds are NOT to be placed, or alternatively preferred banks for the placement, the order will not be automatically pooled, but can be included in a specific group by the dealer if requested. Any special conditions relating to an order, entered in the dealer instructions field, will also prevent an order from being automatically pooled. Details of preferred and excluded banks for the placement of funds are held on the file FD.CUST.DETAILS.

The dealer may wish to split the principal of one order into several smaller orders of the same total amount. The dealer may split the order to spread the customer’s exposure over several fiduciary banks, or adjust the amount for the placement. Once an order is split, the original order is not processed, and is replaced by the appropriate number of split orders.

If an error is made in the entry of the order, this can be corrected if the order has not been approved by the dealer. If an order has been approved but not yet placed by the dealer, the approval can be cancelled, the correction made, and the order can then be re-approved. Once the placement has been made by the dealer, amendment of the details of principal, currency, value date and maturity date can only be made by reversing the FD.FIDUCIARY (placement) contract which will then allow all orders linked to the placement to be amended.In this case all orders in will be re-pooled, and must be approved by the dealer again.

An order which has been pooled, may be replaced by a new order with the same financial details (i.e. amount, currency, value and maturity dates).  This may be required when the customer details originally entered are incorrect.  Orders can be replaced any time up to maturity, or the first interest payment or principal change.  Any accounting entries already made (i.e. at drawdown), will be reversed for the old order, and re-generated for the replacement.  The old order will then be reversed.  All processing for the replacement takes place during the end of day.

FIDUCIARY COMMISSION

Fiduciary commission can be taken at the start or end of a deposit, and at principal and interest movements on Notice contracts if required. The type and calculation of commission is determined by parameters defined at the customer level. Each customer has a CUSTOMER.CHARGE record, which indicates which FD.GROUP.CONDITION applies to the customer. The FD.GROUP.CONDITION record defines which FD.COMMISSION.TYPE record will be used to derive the amount of commission applicable.

Different commission types can be specified for each category of deposit. If no details are defined for the particular category of a deposit, the  details for the order type will be taken. Together with the type, a maximum and minimum commission amount, and a percentage of the calculated amount to be taken can also be defined.

The FD.CHARGE.PARAMETER file specifies whether commissions are taken in Advance, or in Arrears, whether the commission is to be calculated based on the principal, interest or income (principal plus interest) of the deposit. This file also specifies whether commission is calculated or not on principal movements and interest settlements for Notice contracts. The minimum commission amount may only apply for principal or interest movements, and this is also specified. The commission type, commission calculation basis, and when the commission is to be taken will be defaulted, but can be overridden by the account officer. The commission amount is calculated using the following formula :-

   Commission =Base Amt * Comm Rate * No Days
               -------------------------------
                      Day in year * 100

If commission is taken in arrears for Fixed contracts, the commission amount will be accrued throughout the life of the contract. Principal movements during the commission period will be taken into account when calculating the commission. The base amount used is a weighted average of the principal over the commission period.

ORDER RENEWALS

Orders can be renewed automatically on maturity of an existing Fixed deposit. A new order will be generated a number of days specified on FD.PARAMETER before the maturity of the existing contract. The new contract can be created either fully authorised, unauthorised, or with hold status.

The principal of the renewed order can be either the principal of the existing deposit, or the principal plus interest (less commission if taken at maturity). The amount can be rounded to the nearest lower multiple of the currency as defined on FD.FID.CURRENCY.

A report of new renewals for attention of the account officer will be produced by the end of day process.

FD.FID.CURRENCY

This application is used to define details of amounts that are required as a minimum and a multiple of the currency for a Fiduciary deposit.

For each currency used for Fiduciary transactions a record should be defined specifying the minimum amount allowed for deposit, and the amount of which the order should be a multiple. When orders are input, any principal or principal change not satisfying these parameters will require an override. When automatic renewals are generated and the new principal is based on income, the new principal will be rounded according to the currency multiple.

Any category code or type that is to be defined on the FD.GROUP.CONDITION file must be defined in this application first.

Pooling:

for Fix, by the same currency, value date and maturity date. for Notice, by the same currency and value date.

FD.PARAMETER

This application is used to define the defaults and parameters required for the operation of the Fiduciary module.

The category code ranges available for the FD.FID.ORDER and FD.FIDUCIARY applications, and the default category codes are defined here, with the types of contract that can be used.

Frequencies for accruals of both interest and commission must be specified, along with the Profit and Loss categories used for posting accrued commission, and brokerage.

Fiduciary deposit renewals are controlled by the parameter file. The number of days prior to the maturity of the existing deposit before generation of the renewed order is defined. The level of automatic approval of override for the renewals should be specified here.

The parameter file also defines how long matured contracts remain on the live file before being written to history, and the default number of days before an interest rate change that the rate change advice is to be produced.

Why accrued interests of a Fiduciary Notice is not shown on the valuation?

In FDO (Fiduciary order),  see if Field53 int.pay.date has datas. e.g. 3012M0130 In FDP (Fiduciary placement), check Field16 int.pay.date. Attention: Accrued interests will not be updated utill EOD.

Normally if so, you can see in FDO, Field50 committed.int: the amount of interest to be credited to the customer at the next interest payment date of contract maturity. The committed interest is only recorded on the order when the associated fiduciary placement with the id shown in FIDUCIARY.NO is authorised. There will be no committed interest on NOTICE orders where the next interest payment date is not known. The interest for the order is calculated by

   Order Int =   Placement Int * Order Prin
                     Placement Principal

In FDP, Field15 interest.amt: the amount of interest calculated up to the Maturity date for FIXED contracts, and the next interest payment date for NOTICE contracts. The interest amount is calculated when the interest rate and next interest payment date is known. If any principal change and/or rate change falls within the current period, the amount is recalculated.

The amount of interest calculated for the placement is used to determine the interest due to each order. The principal of each order is taken as a percentage of the placement principal, and this percentage is used to calculate the interest due on each order.

Data model