project manager Yuriy Yurchenko

Subsystem of transfer P&L calculation based on Balance of Transfer Resources (BTR)

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Transfer P&L calculation was implemented in

Objectives• The main task “BTR” subsystem is to give two reports :

• Managerial balance of transfer resources• P&L report, which include information about transfer income and

expenses (This report already include information about direct income and expenses)

• All of these reports represent information in the following accounting perspectives (syn. “dimensions”):

• Responsibility Centers (RC)• Bank products • Brunches• Clients • Clients segments• Relationship managers• Account managers• Original currencies

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Methods

Transfer profit and loss are calculated by means of the so-called Balance of Transfer Resources .

Stage 1) Input Transfer Interest Rates. Download from MS Excel or input manually transfer rates. Curve of transfer rates are represented in “Table of transfer rates” in B2 :

interest rates %

Term, days

• For each currency• Optionally for each product or

product group (for example “OFFER Group”, “BID product”)

Stage 1) Transfer rate definition

5K * ( rate + spred + base + incentive margin + country spread + MRR)

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Stage 1) Transfer rate definition

Transfer rate is…•fixed as of the external deal value date and is unchangeable till the expected close date

•changed when the external deal rate is changed (“mirror rate”)

Stage 2) Balance of Transfer Resources calculation

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Resource account 1 RC 1 Product 1 BRN 1 segment 1 Term 1 Transfer rate 1 Actual account balance 1 Transfer P&L sum 1Resource account 2 RC 2 Product 2 BRN 2 segment 2 Term 2 Transfer rate 2 Actual account balance 2 Transfer P&L sum 2…….Resource account N RC N Product N BRN N segment N Term N Transfer rate N Actual account balance N Transfer P&L sum N

Stage 2) Calculate Balance of Transfer Resources, using “cases” ( algorithms)

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“Cases” ( algorithms ) Bank can enable/disable all of the following algorithms :

• Calculation of current account conditionally stable balance ( statistical method : assembly average - Standard Deviation * coefficient of confidence interval (from Student’s factors tables(William S. Gosset ‘s table)))

•Term of Overdraft = real term of overdraft balance on current account

• Term of overdue loan debt = maximal term in transfer rate table

• Calculation of discrete terms in financial instruments (deposits) with opportunity to fill up at any time (term is calculated as difference between the expected close date and the date of the deposit replenishment)

•Advanced repayment (annulment) of loan - in such situation there is a re-calculation of transfer profit/loss, and transfer rate are used with new (reduced) term

• Calculation of LLP amounts as transfer resource: Loan departments take transfer income for these “resource” (Loan departments has already taken direct losses because of LLP formed => Transfer P&L accrued on Net Balance Value of loans),

• etc. etc. etc.

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Account with low volatility

balanceassembly average

account conditionally stable balance

- assembly average - Standard Deviation * coefficient of confidence interval

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Account with high volatility

balance assembly averageaccount conditionally stable balance = 0

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sum

term 2

Term of agreement 1

term 3deposit replenishment #2

deposit replenishment #1

deposit replenishment #3

Each replenishment calculate like separate transfer resource: