Example: Capitalizing Payments
A main master contract, MC #1 contains two fully-disbursed participant loan accounts:
LO #1 with a committed limit of EUR 130,000
LO #2 with a committed limit of EUR 70,000
Customizing
The master contract is based on a product in which the Facilities feature is active and which is customized as follows:
Facility Control
Attributes |
Value |
Credit Clearing Mode |
1 — Debit Balance The utilization balance of a master contract is the sum of all negative balances of the participants in this master contract. Positive balances are not taken into account. |
Clearing Mode for Currency Translation |
1 — Clearing After Currency Translation |
Utilization Calculation
The Master Contract
The nominal utilization is to be checked against the global external limit. The effective utilization is to be checked against the global internal limit.
Participant Loan Accounts
The utilization calculation base relevant for nominal utilization is Nominal Capital. The utilization calculation base for effective utilization is Remaining Capital plus Prenotes.
Master Contract and Account Processing
MC #1 has a committed limit of EUR 200,000 and no tolerated overdraft limit.
A repayment is made on LO #1, but the client is low in funds at present and agrees with the bank to capitalize the interest due on LO #2.
If the repayment received on LO #1 exceeds the value of the capitalized interest on LO #2, neither the nominal nor effective utilization of the master contract facility is breached. The system allows the capitalization of the interest.
If however, the repayment received on LO #1 was lower in value than the capitalized interest on LO #2, the facility check on the master contract returns an error message and the system does not allow the capitalization.
This table illustrates the effects of the capitalization:
Global Internal Limit |
Nominal Utilization |
Open Nominal Utilization |
Global External Limit |
Effective Utilization |
Open Effective Utilization |
|
LO #1 |
130,000 — repayment 1 |
130,000 — repayment 1 |
||||
LO #2 |
70,000 + capitalized interest 2 |
70,000 + capitalized interest 2 |
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MC #1 |
210,000 |
200,000 — repayment 1 + capitalized interest 2 |
10,000 + repayment 1 — capitalized interest 2 |
210,000 |
200,000 — repayment 1 + capitalized interest 2 |
10,000 + repayment 1 — capitalized interest 2 |
Calculation of the Nominal Utilization after capitalization:
Participants |
Global External Limit |
Nominally Utilized Amount |
Non-Utilized Amount |
MC #1 |
210,000 |
200,000 — repayment 1 + capitalized interest 2 |
10,000 + repayment 1 — capitalized interest 2 |
LO #1 |
130,000 — repayment 1 |
||
LO #2 |
70,000 + capitalized interest 2 |
Calculation of the Effective Utilization after capitalization:
Participants |
Global Internal Limit |
Effectively Utilized Amount |
Non-Utilized Amount |
MC #1 |
210,000 |
200,000 — repayment 1 + capitalized interest 2 |
10,000 + repayment 1 — capitalized interest 2 |
LO #1 |
130,000 — repayment 1 |
||
LO #2 |
70,000 + capitalized interest 2 |