1 Introduction

A Bank provides different facilities to Corporate customers. The facilities offered are issuance of Letters of Credit, Bank Guarantee, Collection of Bills etc. For rendering these facilities the Bank collects commission. Oracle Banking Trade Finance Cloud Service supports issuance of Letters of Credit, Collection of Bills etc.

Lines of business like trade finance and foreign exchange have a host of fees associated with them. For instance when a bank opens a letter of credit, it charges a commission which could be a percentage of the LC value for a period. Similarly, when a bank sends its exporter’s bill for collection it recovers a commission for processing the bill. It also recovers a collection charge when the bill amount is received from the importer’s bank (after it is paid by the importer).

In foreign exchange transactions, a bank normally recovers commission for entering into a forward contract against a bill transaction. A bank also charges a premium for entering into a derivative transaction with a corporate customer.

To process a contract, your bank may collect any or all of the following commissions:
  • For issuing or advising a Letter of Credit (LC)
  • For amending certain details of an issued or advised (LC)
  • For issuing a shipping guarantee
Commissions on a contract can be:
  • Calculated as a percentage of the contract amount or as a flat amount
  • Collected on a periodic or non-periodic basis
  • Collected in advance or in arrears
  • Accrued or not accrued

Thus, there are different ways of collecting commission from your customers. Every time a contract is processed, you need not specify when and how the commission should be collected. Instead, you can define the attributes of a specific commission as a Commission Rule. A rule identifies the basic nature of the commission component.

After the creation of a Commission Rule, proceed to create a Commission Class. The Commission Class is then attached to a Product.

More than one type of commission can be applied on an event, in the lifecycle of a product.

In Oracle Banking Trade Finance Cloud Service, you process commissions as follows:
  • Before a product module becomes operational, you should maintain certain basic information on commissions, which will later be linked to a product. To create this information, you will have to define commission rules. You will create Rule types for commissions with attributes suitable for the product where these rules will be applied. You give each commission rule a specific Rule ID.
  • When you define a product, you can choose the required commission rules that are applicable for contracts in the product and link these rules to the product. The product will inherit the Rule ID’s that are linked in this manner.
When you process a contract, the commission details defined for the product in which the contract has been entered would be applied automatically on the contract. In other words, the commission rule is ‘defaulted’ from the product under which the contract is processed. However, if required, you can change some of the attributes for a commission, for a specific contract.
To process commission in Oracle Banking Trade Finance Cloud Service, perform the following order given below:
  1. Commission Rule Availability Maintenance - Branch Specific Rules
  2. Commission Rule
  3. Commission Class
  4. Link to a Product
  5. Link to the Contract
This chapter contains the following sections: