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Temenos T24 Miscellaneous Deals: User Guide
Temenos T24 Miscellaneous Deals: User Guide
Miscellaneous Deals
User Guide
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electronic or mechanical, for any purpose, without the express written permission of TEMENOS Holdings NV.
MISCELLANEOUS DEALS
Application overview
The MISCELLANEOUS DEALS (MD) module is used by T24 to record the miscellaneous
contingent deals that are required to record ‘Guarantee’ type transactions on the banks’ books. These
range from straight forward Guarantees, both issued and received, to more specific Trade Finance
related deals such as Bid and Performance Bonds. It allows for forward dated contracts, full charging
facilities using standard FT.CHARGE.TYPE and FT.COMMISSION.TYPE tables. In addition
customised delivery advices can be produced.
Certain types of MD.DEAL can be used to feed into the LIMIT and COLLATERAL modules.
These need to be of the Contingent Liability type.
MD.Parameter
The foundation block for MD module is the MD.PARAMETER, which will have a record matching the
COMPANY code of the T24 account e.g. US0010001. Some of these fields are explained below.
Basic Types
Essentially, there are four basic types contracts and all deal types created must be based on these
types:
In the table below a simple deal sub-type structure is illustrated, with plenty of room to add new types
at a later date.
Limits
According to the bank’s requirements the use of a LIMIT with either Contingent or Memo Assets can
be made Mandatory, Optional or No-Input using the fields CONT.LIMIT.LINK, MEMO.LIMIT.LINK,
CL.LIMIT.LINK and ML.LIMIT.LINK.
The style of Limit reporting is user defined, default LIMIT settings are defined in
LIMIT.PARAMETER record called SYSTEM.
MD.DEALS may be closed/mature and the Limit may be updated on line by input into Events
Processing. This will enable the Bank to issue another Guarantee for this customer.
If an MD deal is input with an account attached for Commission , Charges or a Provision related
account , the system will raise forward entries when these are to be debited on a future date. Since
these forward entries are raised for an account , T24 will not allow a user to close the account during
the existence of forward entries and will produce the following error “Cannot close forward entries
exists”. This applies to both CA and CL type of Contract with begin and end type of CSN and also for
fixed and frequency type of CSN .
In MD DEAL when commission rate has to be changed, it has to be done for entire category instead
of one particular deal.
This will result in compulsory change of rate for all the deals which falls under this particular category.
Now two new fields have been introduced in MD.CSN.RATE.CHANGE – i.e Deal ID and Deal Comm.
Rate, through which CSN rate can be changed for particular MD deal.
Currently in MD contract commissions are accrued only in currency of the contract or the deal
currency (no other currency will be accepted). Accrued commission are debited from the account that
is equal to the currency of the contract. Now it has been made in such a way that the CSN.ACCOUNT
will be allowed to accept a different currency account other than deal currency. The rate that will be
used to convert the amount will be the mid rate from the currency table
The user may open a CUSTOMER record for each of its Correspondent Banks who have allocated
credit limits for issuing guarantees. This may be established in MD.CB.LIMITS.
The Correspondent Banks limit may be indicated by input Yes/No into CB LIMIT UPDATE in
MD.DEALS.
The user can opt for this feature while requesting a CB to issue international guarantees or while
issuing international guarantee which are to be confirmed by a CB. In such cases, the correspondent
bank will be selected in the field RECEIVING.BANK in MD.DEAL. The CBL of the correspondent
bank will be updated. Similarly any principal movement/ maturity /invocation to such MD.DEALS, CB
limit will also be updated.
MD.Deal
The types of deals that can be entered in MD.DEAL are related to either Contingent Liability or
Contingent Assets. The main feature of these types of deals is that the risk is recorded 'off balance
sheet' otherwise known as 'below the line'. With the options to utilise the LIMIT updates or not at
contract level, and the ability to levy charges or commissions, the number of deal types that can be
entered are many fold.
The examples in this User Guide are an interpretation of some of the deals, which can be entered, but
since each user according to their unique requirements will define the actual use, the Versions used
are not provided as standard in T24. The 'demo' system supplied will normally contain examples of
these types of deals as the 'demo' system has been configured as a live banking environment.
With the appropriate use of VERSION you can create many different deal types.
Using the configured MD.PARAMETER detailed earlier in this guide we can allow deals such as:
• MULTI-PARTY GUARANTEES
▪ Guarantee Issued for Client - with Participations
▪ Participation Taken in Guarantee
• BILLS ACCEPTED
Record Accepted Bill
Flat Charges
MD.DEAL allows for multiple charges to be levied based on the standard FT.CHARGE.TYPE
and/or FT.COMMISSION.TYPE tables. It should be noted that these charges are based on the deal
amount and are not time based so a 1% charge on USD 100,000.00 would be USD 1,000.00
regardless of the tenor of the deal. Similarly the calculation of such flat charge will not take into
account future principal movements, if any. Even if a type of commission is defined under
FT.COMMISSION.TYPE, the same is referred as Charge in MD.DEAL.
The settings to activate this commission are on the MD.PARAMETER file as detailed earlier.
Further details of the use of commissions are given in the section covering multi-party MD.DEAL
types where the commission is both receivable and payable.
• When the resultant commission of a commission schedule in a Deal is greater than the default
value, the computed value stays irrespective of the tenor.
• When the resultant commission of a commission schedule in a Deal is less than the default
value, but the tenor is greater than the default value, the default commission is taken.
• When the resultant commission of a commission schedule in a Deal is less than the default
value and the tenor is less than the minimum period, the commission is recalculated for the
default period. If this commission is greater than the default commission, it is applied else the
default commission is applied.
Commission Frequency
Commission may be defined as a frequency, such as Weekly, Monthly, Quarterly, and Half-yearly etc
instead of defining them manually. Here an option is made available as to when the Capitalization of
the cycle should take place in the event of the last day of the schedule falling on a holiday. This may
be Forward, meaning the next working day, Backward, the previous working day or Calendar, on the
same day. The default is Calendar day.
This feature may be used for Call/Notice contracts where the Maturity date is not known. In the event
of the normal contract maturing on a date prior to the end of the calendar cycle, the field
CAPITALIZE.DATE shall be opened up after the contract has matured but the capitalization is
pending.
In such a scenario, the user has the option to input a date on which the capitalization is to take place,
which otherwise during the life of the Deal is a no-input field.
Effective Date indicates the date from which the new rates should take effect. This can be any day
such as past, current or future but cannot be greater than the Revision date. Deal sub type has to be a
valid Id in the MD.TXN.TYPE.CONDITION. For a given Deal sub type it may take any Category as
defined in the Parameter. For each of this Category, a commission rate may be defined. The field
RETRO.EFFECT throws up the option as to whether the changes have to take a retrospective effect in
the event of EFFECTIVE.DATE defined as Backdated.
This field has to be set to YES or NO. If the impact of the change results in additional commission to
be collected, the same is done from the account that was/is debited/to be debited in the running
schedule. Alternatively, if it results in refund of commission, the current schedules account is credited.
The tax component will however be recovered if additional commission is to be recovered, however no
repayment of tax component will be done if the change results in customer credit.
In respect of Participation Deals, CSN Rate change shall not carry any retrospective effect. However,
the new rate shall be computed from the revision date onwards.
Figure 13 MD.DEAL
Using the fields INCLUDE.START.DATE and LAST.DAY.INCLUSIVE the USER can control the
interest calculation method.
By setting INCLUDE.START.DATE to “Yes” and LAST.DAY.INCLUSIVE to “No”
CSN.COMMISSION will be calculated for the first day and not calculated for the last day of the
payment period of every scheduled period. A record of this type in EB.ACCRUAL.PARAM will be
the default calculation method that is applied to all MD.DEAL transactions should the USER fail to
select any other method.
By setting both of these fields to “Yes” the commission will be calculated for both the first day and the
last day of the initial scheduled period. For subsequent scheduled periods the commission will be
calculated for the last day but exclude the first day.
In the absence of any records being defined in EB.ACCRUAL.PARAM the system will revert to
coded routine based calculations where CSN.COMMISSION will be calculated for the first day and not
calculated for the last day of the payment period of every scheduled period.
This is optional and at the record level the same is defaulted, but permits the user to override. Here
the user has the option to define either a percentage or the amount. When a percentage is entered the
amount is calculated on the NET.PRIN.AMOUNT. Similarly when an amount is entered, it is converted
to the percentage of NET.PRIN.AMOUNT. In other words, for Participation Guarantees, Cash Margin
will be applicable only for the Leader’s portion or for the balance outstanding in NET.PRIN.AMOUNT.
It is possible to establish a percentage for a contract group in APPL.GEN.CONDITION. Here the
user may stipulate different provision rates for the same category of guarantee like deal amount-wise,
if required.). Care should be taken to define the groups in such a manner that no contract falls in two
different groups. If so, the first fit will be returned and the Grouping may be defeated.
MD.GROUP.CONDITION may be used for setting up provision percentage of a particular GROUP
deal subtype-wise and category-wise. (GROUP id as defined under APPL.GEN.CONDITION will be
the id here). In addition to that, C-1001 will be accepted as id where the customer number is 1001.
The specific condition for the customer will be defined here.
When Provision is set to YES, in MD.DEAL, the related fields will open up. User has the option to
define the account from which provision is to be taken and into which it is to be kept through the fields
PROV.DR.ACCOUNT and PROV.CR.ACCOUNT. Using the field PROV.REL.DATE the user may define
the date on which the provision is to be released. Although the default release account is
PROV.DR.ACCOUNT, yet the user may specify a different account in PROV.REL.ACCOUNT. This
release of provision is done as a Close of Business activity.
It is possible to release Provision online at any point of the life of the Deal. This is controlled from the
field RELEASE.PROV. This is to be set to YES and followed by input in RELEASE.AMT.
Expiry Option
An option has been made available to keep the Deal live till the original Guarantee is returned. This
means that beyond the maturity date the deal stays with the status CUR and does not become LIQ
unless the user sets the AUTO.EXPIRY to YES. This is controlled from the Parameter level and from
the record level.
Alternative ID
A MD Deal may also be identified with an alternate Id. This is to be input by the user in the field
ALTERNATE.ID. The deal may be invoked by using this Id as well.
Multi-Participant Deals
These are usually Guarantees issued on behalf of a client where the amount requires the participation
of other banks to spread not only the risk but also sharing the commission collected. It is convenient to
use terminology such as Syndicated, Participant, Lead Bank and Issue Customer in explaining how
MD.DEAL caters for Multi-participant deals.
Typically there will be a master deal issued by the Lead Bank with one or more banks participating.
The client will be charged a commission based on the amount and tenor of the deal, some of which is
passed on to the participants. The Lead Bank will assume the remainder of the deal risk and the
commission.
♦ To book a master deal (CA) for the entire value of the guarantee issued i.e., for Leader’s portion
plus all participants’ portion. And book separate CL deals for each participant’s share. Asset
Liability will not be netted in the master deal. The entire commission collected from the client will
be booked/accrued as income under CA deal and participant’s share will be accrued/distributed as
expense under CL deals. The accounting rules for such set of guarantees are explained below.
♦ To book a consolidate deal for the entire value defining the various participant’s share in the same
deal. The asset liability will be netted in the deal. The participant’s share of commission and tax
thereon will be credited to an internal account and only Leader’s share will be accrued/booked as
income as explained below.
Movement in Participation
In a Participation Deal, positive or negative movement for the Participant is now permitted. The only
pre-condition for the movement to happen be that participant should first defined under PARTICIPANT.
Participant's Commission
In MD.DEAL it is possible to split the Participant's commission, which was otherwise ending up in the
books of the Leader and thereby moving into the P&L account entirely. At the Parameter an account
may be defined as shown that would receive the Participant's share in the Deal.
Then the commission portion relating to the Participant gets accounted here. The amount due from
each of the Participants is tracked here up to date in the current schedule. This can be used to find the
balance due to a participant on a given date should the Participant wish to withdraw. This gets multi-
valued for each of the Participant customer in the file MD.PART.CSN.BALANCES.
The account statement also shows the break-up of the above. The table MD.BALANCES also shows
the entire amount of the Participants' share. This file is not available, where the CSN.PAYMENT.TYPE
is Begin
Accruals:
On schedule date:
DR CSN.ACCOUNT on MD.DEAL
CR Commission Income (asset type)
• Participation Given
Accruals:
On schedule date:
The CSN.ACCOUNT on MD.DEAL can be a Client Account, a Nostro or an Internal account. In the
case of internal accounts, the actual payment of funds is outside the scope of the MD module and can
be made by manually entering FT transactions.
MD covered by Collateral
As well as being used as Collateral items MD deals can in fact be covered by Collateral. For instance
there may be a requirement that the amount of guarantees issued for a client is dependent on the
amount of collateral held. This can be through the use of a variable LIMIT where the LIMIT
increases/decreases based on the amount of collateral; or the collateral item can be linked to the MD
deal using COLLATERAL.RIGHT. The MD.DEAL reference would be entered instead of the
LIMIT id in the LIMIT.REFERENCE field.
MD link to Syndication
A link is available in MD.DEALS to link in the Syndication ID. This may be input into Sl Ref
Tranche and Sl Prod Type. This will create a link to any syndicated structure. This will support
the same enabling as an online update of such a structure along with the static update of the requisite
information.
MD.Activity
These records provide descriptions for the delivery advices created by MD.DEAL; they are referred
to by MD.ADVICES.
MD.Advices
This file is used to specify which format advice is sent for each CATEGORY of deal. It is likely that a
standard advice is to be produced to cover the many different types of deal that can be entered in
MD.DEAL. Using this application you can control which activity requires an advice to be sent based
on the deal category. It is possible to reduce the number of DE.FORMAT.PRINT records required
by having a common format that is called instead of a unique one for each CATEGORY.
Soft Delivery
All the four important SWIFT messages MT760, MT768, MT767 and MT769 are supported now.
Setting the BACKWARD.DELIVERY field in the Parameter to NO shall enable these.
Figure 33 EB.ADVICES
After enabling the Preview, with the input of PREVIEW in the MD PGM.FILE, all the SWIFT related
messages might be viewed, provided the relevant fields for the said messages are input. In case the
valid fields are not input appropriate override/error messages are displayed.
An option has been made available in MD.CLAUSES, where the user inputs the standard formats
and invokes them at the Deal, by the input of the MD.CLAUSES Id and committing.
To implement soft delivery in the lines of LC, the various activities involved in MD need to be identified.
As followed in LC, the activity code can be of 3 parts viz. operation, instrument and event. Hence, an
activity code in MD will look like MD-XYZZ where,
Code MD
1 Opening new
2 Amending
Table 2
Instrument
Code MD
1 CA
2 CL
3 MA
4 ML
Table 3
Event
Code MD
01 Input / Authorisation
Table 4
Moreover, like in LC, message classes need to be raised for sending advices based on some
conditions. These are internal classes confined only to MD and will be mapped to generic EB
message classes.
Message classes:
MD
Table 5
* Only when RECEIVING.BANK is mentioned
All the messages that need to be produced are attached to the corresponding activities thru
EB.ADVICES. Some messages will be produced regardless of whatever message classes are raised.
Like confirmation of deal, confirmation of amendments etc., other messages will be produced only
when the related message classes are raised during the activity.
Hence, online or during EOD, we need to build up the correct activity code and raise relevant
message classes to produce necessary messages.
Besides, by setting the MESSAGE to PREVIEW, the 'preview' button will be enabled in the desktop.
The HANDOFF record needs to be built in a different fashion. The structure of the HANDOFF for soft
delivery will be as follows:
Record #1 R.NEW
Record #2 R.OLD
Record #3 Charges
Record #4 Commission
Record #5 Provision
Record #6 -
Record #7 SWIFT tags
Record #8 Header
Record #9 User defined
REC8<1> COMPANY
REC8<2> CUS.COMPANY
REC8<3> APP.FORMAT
REC8<4> MESSAGE.TYPE
REC8<5> CURRENCY
REC8<6> DEPARTMENT
REC8<7> TRANS.REF
REC8<8> CUSTOMER
REC8<9> LANGUAGE
REC8<10> ACCOUNT
REC8<11> VALUE.DATE
REC8<12> AMOUNT
Backward compatibility:
Since the structure of handoff is now different from the previous one, we may have to amend the
DE.MAPPING records for messages relating to MD while implementing soft delivery.
Alternatively, if the client wants to continue with the existing delivery mechanism, we can have a
parameter level field to direct the program to run old delivery program or the new program.
Handoff Rec 3 - Charges
Date
Currency
Account
Code
Amount
Total Charge
Description
Account title
Handoff Rec 4 - Commission
Date
Currency
Account
'COM' (as code)
Amount
Total amount
'Commission' (as description)
Handoff Rec 5. - Provision
Movement date
Debit amount LCY
Debit currency
Debit amount FCY
Credit amount LCY
Credit currency
Credit amount FCY
Exchange rate (debit)
Exchange rate (credit)
Provision amount
Provision Debit account customer
Provision credit account customer
New Messages :
760
767
768
769
New Mapping keys:
Contingent Confirmation 2320.MD.2
Charge Advice 2900.MD.2
Commission Advice 2900.MD.3
System files
MD.BALANCES
MD.PARTICIPANT.CSN.BALANCES
MD.PROV.BALANCES
MD.SCHEDULES
MD.SCHED.DATES
These files hold the details of the MD.DEAL record accounting movements and schedules; they
require no input or maintenance by users.
They may be used for providing details for ENQUIRY records created locally, or for reports and
advices.
In order to report the deals to the appropriate ledger line the following values can be used in
RE.STAT.REP.LINE in the field ASSET.TYPE:
Whilst the Contingent Assets/Liabilities are reported below the line, the memo equivalents are usually
off-balance sheet. However, these can be used for internal ledger purposes.
If we consider a MD.DEAL for GBP 10mio as an example, the GL accounting and Limit updates will
take place as follow:
• On value date
• At maturity
To record a Bid Bond Guarantee issued we record the deal type, category and customise the screen
input prompts as shown below:
Behind the VERSION called MD.DEAL, BID we have to pre-set some of the data which will be
populated each time.
Here is an extract of the VERSION record for MD.DEAL; BID showing we are populating the
CONTRACT.TYPE, DEAL.SUB.TYPE, CATEGORY, LIMIT.UPD.REQD and ADVICE.REQD fields.