Interest Compensation 

Definition

Determines the charges to be calculated periodically for master contracts.

Use

You can use interest compensation to settle a master contract and its participant accounts. The aim is to offset any extreme debit and credit balances within the master contract. In addition, mutual use of free items needs to be possible for the whole master contract.

In the context of interest compensation, the debit and credit balances of participant accounts in a master contract are grouped together, and interest is calculated on the basis of the resulting consolidated balance. The main aim of charge compensation is mutual use of a defined number of free items for several participant accounts.

The system executes interest compensation in the context of the periodic account settlement. It is also possible to use interest and charge conditions for compensation in an alternative way.

Structure

You can call up the following transactions in dialog mode:

·        Individual processing

Transaction Code	Short description
BCA_ACBAL_INTC	Edit Dates of Account Settlement
BCA_ACBAL_INTC_REV	Execute Account Settlement
BCA_ACBAL_ACPOOL_PER	Reverse Account Settlement

·        Mass processing

Transaction Code	Short description
F991	Execute Account and Master Contract Settlement
BCA_ACBAL_REVM	Reverse Settlement

Example

·        Interest compensation without charge compensation

For the interest compensation without charge compensation variant, first the debit and credit balances are summarized. The charges are calculated for the individual participant accounts using the conditions of the respective account and then debited from the account itself. The interest result is calculated and posted on the master account (the superordinate, central account in a master contract).

·        Interest compensation with charge compensation

In this variant of interest and charge compensation, both the value date balances and the counter statuses of all participant accounts are cumulated. All calculation results are posted on the master account.

·        Overdraft limits for master contract

For a master contract, you have to define the total debit balance (= total of the balances of all accounts in the master contract) as of which you want overdraft interest calculated. There are two conceivable alternatives for this, for both of which you need to be able to make the settings in the application.

¡        Central overdraft limit / interest compensation limit

If there is a central overdraft limit for interest compensation, an overdraft limit (interest compensation limit) stored on the master contract is used for the interest settlement. This is the ‘interest compensation limit’.

Account	Overdraft limit	Overdraft limit for master contract settlement	Interest compensation limit
Account 1	500,000	1,000,000	1,200,000
Account 2	200,000
Account 3	300,000

Result: Overdraft interest is calculated for balances < 1,200,000.

Using cumulated limits of participant accounts:

For this variant, the total of the overdraft limits created on the participant accounts is used to calculate the settlement for which interest has been compensated.

 Example

Account	Overdraft limit	Overdraft limit for master contract settlement
Account 1	500,000	1,000,000
Account 2	200,000
Account 3	300,000
Interest Compensation Limit	1,200,000	1,200,000

Result: Overdraft interest is calculated for debit balances < 1,000,000.

Simulated settlements for participant accounts:

Simulation of interest settlement is required for the bank’s controlling purposes or the bank customer’s cash management. This involves calculation of the settlement as though interest had not been compensated for the relevant participant accounts. The condition group valid before participation in the master contract is retained on the individual participant account for the simulation.. For the simulation, a settlement run is started with the ‘simulation’ option. When settlements are simulated, the interest calculation results are not posted on an account but only formatted as print output list.

Limitations

Note the following restrictions:

·        The AM system does not check the legal relationships between accounts of individual entities / legal persons. The system user must ensure these checks are made, as only functional checks are made within the Account Management system.

·        A participant account may not function as payment details (reference account) for another account. This applies to all accounts within the master contract, as well as all other accounts in the Account Management system.

Example

The following graphic illustrates calculation of an interest settlement, with and without interest compensation:

 

For charge compensation, the free items from the master contract can be used mutually by all participant accounts. This means that no free items of an account that have not been used are lost. During settlement, the item counters are totaled for all accounts and this total is then attributed to the number of free items in the master contract.