Pricing Adjustments
The Pricing Adjustment property class allows the user to negotiate the charge amount, interest rates at the arrangement level for multiple properties (interest/charge) by triggering <PL>-UPDATE-PRICING.ADJUSTMENTS activity. The benefits of enabling the Pricing Adjustments property class in the product include:
- The banks can define the charge at product level, which helps to reduce the data growth.
- When there is a need to negotiate interest / charge for the customer, the bank can do so by using Pricing Adjustments property class.
- Interest adjustments can be fixed, floating, periodic types and can be tiered definition along with usage percentage.
- Rate can be determined from the interest grid and can have Spread and Margin definition.
Product lines
The following Product Lines use the Pricing Adjustment Property Class:
- Accounts
- Deposits
Property Class type
The Pricing Adjustment Property Class uses the following Property Class types:
- Dated
- Non Tracking
- Variations Supported
Property Type
There is no associated Property Type with this property class.
Balance Prefix and Suffix
The Pricing Adjustments property class is not associated with any balance prefix and suffix.
Attributes
The attributes of the Pricing Adjustments condition are explained below.
Pricing Property
Allows the user to specify the interest / charge property for which negotiation has to be done at the arrangement level. This is a multi-value field.
Pricing Property Class
User can select only “Charge” property class using this option. User can select only "Waive" in Adjust Type attribute if Pricing Property Class attribute is configured.
If Charge property class is selected, charge is waived for all the charge related properties excluding the charge properties for exception pricing is defined (that is, charge properties for charge amount negotiated using <PL>-UPDATE-PRICING.ADJUSTMENTS activity).
Pricing Property and Pricing Property Class attribute to be configured in separate multi-value to make use of this functionality.
Adjust Type
The allowed options are Adjust.amount, Adjust.percentage, Adjust.rate, Override.amount, Override.rate and Waive.
- For charge related negotiation, the banks can use Adjust.amount, Override.amount and Waive options.
- Adjust.amount – User can specify the charge amount to be adjusted with the original charge amount.
- Override.amount – User can specify the charge amount which needs to override the original charge amount.
- Waive – User can select this option if charge amount needs to be waived off.
- For interest related negotiation, the banks can use Adjust.percentage, Adjust.rate and Override.rate options.
- Adjust.rate – User can specify a fixed rate by which interest amount gets adjusted.
- Override.rate –User can specify a fixed rate using this attribute to override the product rate.
Adjustment
User can input a fixed rate / amount using this attribute. Based on the Adjust Type configuration, value specified in Adjustment is used at the time of negotiation.
Expire On Change
User can select this field, if interest rates negotiated at an arrangement level needs to expire whenever there is a change in term and conditions. The following are the list of qualifying activities for which the negotiated pricing expires.
- DEPOSITS-RESET-ARRANGEMENT
- DEPOSITS-CHANGE.PRODUCT-ARRANGEMENT
- DEPOSITS-ROLLOVER-ARRANGEMENT
- ACCOUNTS-RESET-ARRANGEMENT
- ACCOUNTS-CHANGE.PRODUCT-ARRANGEMENT
Adjust Reason
User can specify the reason for change in interest / charge at the time of negotiation.
Adjust Expiry Date
User can specify a fixed date using Adjust Expiry Date. On reaching the expiry date, interest / charge negotiated at the arrangement level expires.
Using the above set of attributes (Pricing Property, Adjust Type, Adjustment), the banks can only adjust / override the product rate by a fixed rate.
Defining Different Interest types
Banks can configure any of the interest definition along with a margin (By triggering <PL>-UPDATE-PRICING.ADJUSTMENTS activity) at the arrangement level at the time of negotiation.
- Fixed Rate
- Floating Rate
- Periodic Rate
- All of the above three interest types can also be defined or determined using Pricing Grids
When Adjust Type is set as Override.rate and the Adjustment attribute is left blank, then user can specify the following set of attributes to configure the interest definition as per their requirements.
| Attribute | Description |
|---|---|
| Adjust Rate Type |
Specifies the interest rate type such as fixed, floating, periodic. This attribute is a part of multi-value set to define tiers. Based on the Adjust Rate Type definition, the user can configure the related attributes. |
| Adjust Fixed Rate | Fixed rate can be specified at the time of negotiation. |
| Adjust Floating Index | Floating Index (BI Key) can be specified at the time of negotiation. |
| Adjust Periodic Index | Periodic Index (PI Key) can be specified at the time of negotiation. |
| Adjust Periodic Period Type | Allows the user to specify the period used to fetch interest rate from the PERIODIC.INTEREST table at the time of negotiation. |
| Adjust Periodic Period | Specifies the interest period to be used at the time of negotiation. |
| Adjust Periodic Method | Specifies the method, the system applies when it does not find periodic interest rate in the correct bucket at the time of negotiation. The system automatically applies a method to arrive at a rate chosen by this method, that is, Closest, Next, Previous. |
| Adjust Initial Reset Date | Allows the user to set the first reset date at the time of negotiation. |
| Adjust Rate Grid | Allows the user to specify the interest rate grid (Pricing Grid Product ID) at the time of negotiation. This attribute is mutually exclusive with Adjust Fixed Rate, Adjust Floating Index, Adjust Periodic Index attributes. |
| Adjust Periodic Reset | Allows the user to set the reset frequency in case of periodic rate at the time of negotiation. |
| Adjust Usage Percent | Allows the user to specify a percentage that is applied on the rate based on Usage Percent Basis. |
| Adjust Tier Amount | Allows the user to specify an amount in case of level / band type of interest definition at the time of negotiation. |
| Adjust Spread Type | Allows the user to specify the spread type like single margin, cost of funds, and so on. It is associated with Adjust Spread Oper and Adjust Spread Rate. |
| Adjust Spread Oper | Specifies the operator of the spread type like Add, Multiply, Sub. |
| Adjust Spread Rate | Allows the user to specify the spread rate for Adjust Spread Type at the time of negotiation. |
| Adjust Cust Margin Grid | Allows the user to specify pricing grid product (Pricing Grid Product ID) for margin at the time of negotiation. |
| Adjust Cust Margin Type | Allows the user to specify customer margin type (that is, single margin, cost of funds, and so on) at the time of negotiation. |
| Adjust Cust Margin Oper | Specifies the operator of the spread type like Add, Multiply, Sub. |
| Adjust Cust Margin Freq | Allows the user to specify the reset frequency for the pricing grid product configured in Adjust Cust Margin Grid. |
Read Interest for more details.
Read Introduction to Pricing Grids for Pricing Grid related information.
- To use the above functionality, the product rate should be defined using user set of attributes in Interest condition. However, the system uses core set of attributes for processing the interest definition.
- If the user negotiates the interest by using the adjust set of attributes in pricing adjustments conditions (By triggering PL-UPDATE-PRICING.ADJUSTMENTS activity), then the system defaults the values captured in Adjust set of Pricing Adjustment property class to adjust set of attributes in the interest condition. Then, the system defaults the Adjust set of attributes in interest to core set of attributes in the interest condition. The system then uses the core set of attributes for processing the interest definition.
- The User and Adjust set of attributes are maintained till the arrangement reaches the adjust expiry date. Once arrangement reaches the expiry date, the system removes the Adjust set of attributes and defaults the User set of attributes to the core set for processing the interest definition.
- The user must set the Interest property to Pricing Grid Index Enabled property type in AA.PROPERTY to use the Pricing Grid product line functionality.
- Pricing adjustments attributes are no-input fields at product level.
Example
Consider an example where an interest already defined in a product can be negotiated using the Pricing Adjustment property class by triggering <PL>-UPDATE-PRICING.ADJUSTMENTS activity.
Pricing Adjustment product condition with default values is attached in the product designer and the product is proofed and published.
An arrangement is created on Apr 1, 2024. Floating index (11) is defined for the product. Effective rate of 4% is considered.
On Apr 11, the user triggers the DEPOSITS-UPDATE-PRICING.ADJUSTMENTS activity and provides a different floating index(6) to offer better interest rate to the customer. Effective rate of 6% is considered from Apr 11. Adjust expiry date is set as May 16, 2024. On reaching the expiry date, the product rate (4%) is retained.
The AA.ARR.INTEREST record after new arrangement creation is shown below.
The AA.ARR.PRICING.ADJUSTMENTS and AA.ARR.INTEREST records after DEPOSITS-UPDATE-PRICING.ADJUSTMENTS activity are shown below.
The AA.ARR.INTEREST and AA.ARR.PRICING.ADJUSTMENTS records after reaching the expiry date are shown below.
The AA.INTEREST.ACCRUALS record is as shown below.
Example - Compare With Product attribute is set
For arrangements with negotiated rates provided, the product rate may change during the lifecycle of an arrangement (that is, the Revised product rate might be higher / lower than the negotiated rate). In such cases, banks can configure Compare With Product attribute as Y, so that the system compares the product rate (interest rate derived from the User set) with negotiated rate (interest rate derived from the Adjust set) and applies the favorable rate to the arrangement that is beneficial to the customer whenever there is a change of product rate/negotiated rate.
Consider a product with Compare with Product attribute is set as Y for the interest condition. Floating Index (11) is defined in the User set of attributes in the Interest condition.
The Pricing Adjustment product condition is attached in the product designer and product is proofed and published.
An arrangement is created on May 1, 2024. Floating index (11) is defined for the product. Effective rate of 2% is considered.
On May 10, the user triggers the DEPOSITS-UPDATE-PRICING.ADJUSTMENTS activity and provides a different floating index (2) to offer a better interest rate to the customer. Effective rate of 5% is considered from May 10. Adjust expiry date is set as May 31, 2024.
The AA.ARR.INTEREST record after new arrangement creation is shown below.
The AA.ARR.PRICING.ADJUSTMENTS and AA.ARR.INTEREST records after DEPOSITS-UPDATE-PRICING.ADJUSTMENTS activity are shown below.
On May 16, the interest rate is updated as 7 from 2 for the floating index (11). When the DEPOSITS-CHANGE-INTEREST activity is triggered to update index rate changes on the arrangement (User set), the system compares the product rate (7) with negotiated rate (5) and applies the favourable set (User Set) in the Core set for interest processing.
The AA.ARR.INTEREST record after change interest activity is shown below for reference.
The AA.INTEREST.ACCRUALS record is as shown below.
Add Pricing Adjustments Property to Existing Arrangements
The financial institutions can add the Pricing Adjustments property to the existing arrangements of the Accounts, Deposits product lines using the Add New Property, New Prop Avl, and New Prop Avl Date fields in AA.PRODUCT.MANAGER.
Banks can add the Pricing Adjustments property to the existing arrangements using Today option only in the New Prop Avl attribute. Date and Start option in the New Prop Avl attribute are restricted for Pricing Adjustments property.
Read Add New Property for more information on the configuration.
Periodic Attribute Classes
There are no periodic Attribute Classes associated with Pricing Adjustments Property Class.
Actions
The Pricing Adjustments property class is associated with the following actions:
| Action | Description |
|---|---|
| UPDATE | Used to negotiate the interest, charge at an arrangement level |
Accounting Events
The Pricing Adjustments Property Class does not perform actions that generate accounting events.
Limits Interaction
Actions associated with the Pricing Adjustments Property Class do not have an impact on the Limits.
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