This module will not be further enhanced. Support is limited to defect fixing only.

Introduction to Periodic Interest

The market convention rates have 2-day spot value (T+2). These are the reference rates which are fixed at 11:00 am CET daily and published in Temenos Transact at 11:02 am CET.

Below, there are described the three main dates which calculate the periodic interest for loans:

• Loan creation date: Date on which loan arrangement is created in the system.
• Effective date: Date on which the loan will be available to be disbursed.
• Disbursement day: Date from which the funds disbursed are considered for interest calculation.

The periodic interest rate value is set initially during the first loan disbursement date. The value date is *T date or (T+1) or (T+2), while the trade date can be the T date or (T-1) or (T-2) based on the various business rules, where T refers to the disbursement date.

The loan disburses in different ways. Disbursements schedule on both business and non-business days and it's done in the following ways:

• Loan disburses on the day of the loan creation (if the loan becomes available for disbursement on the same date).
• Loan disburses on the next day after the loan created.
• Loan disburses after two or more days after the loan created.
• Loan disburses on a date prior to the system date.

For computation of the initial interest rate reset, a post routine is attached to the loan disbursement activity (LENDING-DISBURSE activity), by the way of an ACTIVITY.API. This will fetch the periodic interest rate from the PERIODIC.INTEREST application. 

The API checks if the interest product condition Periodic Index field has a defined PI key, if it has a value, the ACTIVITY.API proceeds, else it will exit, if not. The ACTIVITY.API exits in cases where the interest rate is a fixed or a floating rate.

If the PI key is available, the ACTIVITY.API checks for the loan creation date, the loan disbursal date, and the current system date, in order to fetch the interest rate applicable for the arrangement, from the PERIODIC.INTEREST application.

On disbursing the loan, the interest details are updated in the AA.ARR.INTEREST application.

Configure the Date for when the Rate is Derived From

Banks have common rules on how Euribor rates for contract has to be determined. All active loan contracts where interest is calculated based on periodic interest rates must follow a specific rule as per below.

General principle is that whenever for a loan contract where interest calculation is based on periodic interest rates (Euribor) irrespective whether interest is paid at the end of period or in advance, Euribor value on a rate determination date should use the rates set by EMMI as on a previous Finnish bank working day.

When a contract loan is disbursed for the first time, the commission calculation for all loan products with a planned period rate utilisation in the future and account overdraft debit interest calculation needs to use the same logic of using previous Finnish bank working day’s rate of interest.