1.1.2.8 Tenor-Based Commission
Oracle Banking Trade Finance allows you to compute tenor-based commission on a product. You can specify the details required to calculate tenor-based commission in the Trade Finance ICCB Rule Details screen.
| Field | Description |
|---|---|
| Minimum Commission Period | If you indicate the Rate Type, of a commission rule as Fixed Rate, you should also specify the Minimum Commission Period for the rule. The commission defined for the minimum commission period will be applied on contracts with tenors less than the minimum period. If the tenor of a contract is greater than the minimum commission period, commission will be calculated using the amount and tier structures that you build in this screen. |
| Calculating Commission using a Tenor-Based Tier/Slab Structure | You can define a tenor-based tier or slab structure for every amount slab that you have built. The following example illustrates how commission is calculated using a tenor-based structure. |
For Example
You are building a Commission Rule (Rule ID: Tenor Tier) that you would like to associate with a product. You would like to compute commission for the contracts maintained under the product on the following tiered tenor basis:
| Basis Amount(Slab) | Tenor One(0-3 months) | Tenor Two (4-6 months) | Tenor Three (7-999 months) |
|---|---|---|---|
| 0 - 100,000 | 0.1% | 0.15% | 0.17% |
| 100,001 - 1,000,000 | 0.2% | 0.25% | 0.3% |
| 1,000,001 - 99,000,000 | 0.5% | 0.75% | 1% |
Note:
The commission rates are specified in terms of a per month basis (specified in the Rate Period field as 1.)The Rule you are building calculates commission on the basis of a rate. In the Rate Type field, select the ‘Fixed Rate’ option.
Since you would like to calculate commission on the basis of a tiered tenor structure, click on the check box adjacent to Tiered Tenor.
In Basis Amount To, enter the upper limits of the different slabs. That is, enter 100,000; 1,000,000; and 99,000,000.
In the Tenor Based Rates field, you can build the tiered tenors for each amount slab, in the following manner:
For the first amount slab, enter the tenor-based tier structure in the Tenor Based Rates fields. In this case, choose the first amount slab, 100,000 in the Basis Amount field.
For the first amount slab, enter the lower and upper limits of the tenor-based tiers in the ‘Tenor From’ and ‘Tenor To’ columns respectively. In this case, for the first tenor-based tier, enter the 0 as Tenor From, and 3 as Tenor To.
For each tenor-based tier, provide the corresponding rate in the Fixed Rate column. For the tenor 0-3 months, enter 0.1 in the Fixed Rate column.
In a similar manner, build the tenor structure for the other amount slabs.
Note:
Only some fields are mentioned in this example. When building a commission rule, you have to specify other details such as the Commission Currency, the Basis Amount Currency, etc.When the rule is applied on a contract
Assume that this rule (Tenor Tier) is linked to a product. Commission for the contracts maintained under this product, will be calculated using the rule ‘Tenor Tier’. The commission for the following contract is calculated using this rule:
Basis Amount = 800,000
Tenor = 8 months
The Basis Amount falls in the second slab (greater than 100,000, upto 1,000,000). The tiered tenors, corresponding to the second amount slab, will be used to arrive at the commission amount.
The commission amount will be calculated in the following manner:
Commission Amount for the period 0 to 3 months: 800,000 * 3 * 0.2% = 4800
Commission Amount for the period 4 to 6 months: 800,000 * 3 * 0.25% = 6000
Commission Amount for the period 7 to 8 months: 800,000 * 2 * 0.3 = 4800
Note:
In the Trade Finance Contract ICCB screen, the rate applied on the last tier (in the example, 0.3%) will be displayed. You cannot modify the Rate, the Collection Method and the Rounding Period during contract input.Parent topic: Build the Commission Rule