Position Evaluation
Use
You use this function (key date position evaluation and average position evaluation) to compare the development of asset and liability items from both the on-balance sheet and off-balance sheet areas. You can establish the risks and opportunities taken by the bank from the resulting gaps in the maturity bands.
In the position evaluation, you can choose to display only the fixed-rate items; this enables you to display an interest commitment balance sheet.
Features
The system provides the following evaluation:
· Key Date Position
The system displays the positions that exist on the relevant maturity band date.
Key date positions are calculated for asset and liability transactions from the repayments of the transactions. The system adds together the repayments, starting from the latest repayment and up to the respective key dates in the maturity band. The totals on the key dates form the key date positions. Using the nominal product interest rate for each repayment, an average product interest calculation can be assigned to each position, which is calculated and weighted by volume for each key date.
The key date gap is the difference between the asset-side and liability-side key date position
· Average Position
The system displays the average position, whereby the period of time refers to two sequential dates in the maturity band. If you choose a daily maturity band, the key date position and average position will be the same.
If you calculate the key date positions on a daily basis, you can calculate the average positions for each maturity band date to the exact day. Using nominal interest rates, you can calculate average interest revenue or interest expense for each average asset-side or liability-side position.
A transaction with a term from November 1 to November 15 of a given year has a nominal volume of EUR 1, 000,000. The key date position for the maturity band date November 1 is EUR 1,000,000 and for November 30, zero. The average position for the first maturity band date is the same as the key date position. The portion of the position for the period between the two dates is calculated for the second maturity band date: average position = 1,000,000 * 14/29 = EUR 482758.62.
The position evaluation also has the following features:
· Interest Commitment and Capital Commitment
You can choose to display just fixed-rate items, or variable items as well. In gap analysis reporting, set the Commitment indicator to Interest Commitment or Capital Commitment.
Note that setting the Commitment indicator also affects how the maturity evaluation is displayed.
· Product and Opportunity Interest Rates
The system displays the positions with the product interest rates contracted in the past and the respective opportunity interest rates. You can display the static interest rate instead of the contracted product interest rate. The interest rates displayed are volume-weighted interest rates. In another column, the system displays the gap for each date in the maturity band.
· Premium/Discount
The system handles the premiums and discounts associated with loans in the same way as any other position-forming instruments. In the calculation of the average position, premiums and discounts are accrued across the relevant time period.
You can display either the net discount or the gross discount. In the net display, the system automatically adjusts the repayment amounts by the amount of the discount/premium. In the gross display, the repayment amounts are shown in full; and the adjustment takes place in the individual display of the premium/discount on the other side of the balance sheet.
Since the premium or discount also has an impact on the future interest payments, you can make a setting in Customizing to determine whether the positions and the premium or discount amount are shown together with a nominal interest rate or a static interest rate
For more information about the Customizing settings you have to make to influence the position evaluation, see Gap Analysis Settings.