Fiduciary Loans Application

The banking utilization of Fiduciary Loans consists into providing a loan facility to a bank’s customer through a client lender where the Bank acts as an intermediary only. This practice has its economical justification to avoid both lender and borrower to pay taxes due on normal deposits/loans made through the assets/liabilities accounts or for treasury reasons through two portfolios of the same owner of funds.

As the CSFB (Swiss Banking Regulatory Authority) has never clearly stated on such a practice, this feature remains a service that the Private Banking industry offers to their clients.

Globus/T24 system can provide such functionality as follows:

1. Utilization of off-balance sheet categories i.e. 9001 for fiduciaries liabilities and 9501 for fiduciaries assets both with field no 3 SYSTEM.IND set up as AC.
2. Creation of the two corresponding lines for the Bank’s balance sheet in RE.STAT.REP.LINE being contingent asset and contingent liability.
3. Open a fiduciary debit account linked to category 9001 for the client borrowing the funds and a fiduciary credit account linked to category 9501 for the client lending the funds.
4. Set up of the tables ACCOUNT.DEBIT.INT and ACCOUNT.CREDIT.INT respectively for the two accounts accordingly to the deal with the same interest rate.
5. Set up the tables ACCT.CAPITALISATION with the same debit/credit frequency.
6. As this product particularity is that no direct link must be shown between the two parties of the deal, when the contract starts, first debit the lender current account by crediting its fiduciary account and do the contrary with the borrower accounts. At maturity of the contract pass the opposite entries in order to clean up the fiduciary accounts and to reinstall the nominal on the current accounts and transfer the matured interests amount from the debtor to the lender though a suspense account. All entries will be performed in Funds Transfer with the transaction Account Transfer. Considering that all amounts are known, the booking could be also provided by setting up Fixed Standing Orders excepting the interests’ amount if the deal is negotiated at a floating rate instead of a fixed one. In such case the rate will be taken from the BASIC.INTEREST rates (set up field no 6 DR.BASIC.RATE of ADI and field no 7 CR.BASIC.RATE of ACI).
7. The Bank will take its commission and /or fees normally on both clients at deal starts with the fields 46 COMMISSION.TYPE and/or 49 CHARGE.TYPE of the FT version. Appropriate commission must be set up in the table FT.COMMISSION.TYPE with a percentage calculation depending on the amount and a calculation type level, and a flat amount must be set up in the table FT.CHARGE.TYPE. For both fees provide as well the adequate category and transactions codes.