Loans
Loans - that’s something everybody seems to know and understand.
Not necessarely! The practice often shows considerable comprehension questions.
Loans are considered generally often as fiddling, totally intelligible and more over, as a simple financial agreement. But in practice quite
often comprehensive questions arise which lead sometimes to serious problems because of a lack of technical knowledge and/or legal
understandings.
Fundamentials
Technical
This small mindmap shows that a loan has many facings. Dependent, what the goal of a loans is, many different details should be
considered carefully:
Technical Questions
1.
Interest source, e.g. from a newspaper or not approved google hits instead of a common market source - e.g. LIBOR, EURIBOR etc.
2.
Interest calculation, e.g. because of the currency and duration the correct day-count coventions need to be applied.
3.
Fundamential calculations, e.g. a loan which started at 30.06.xx and ends at 31.12.xx with a prolongation to 30.06.yy is calculated
30.12.xx - 31.12.xx and 01.01.yy - 30.06.yy. Here, one day is missing, the day from 31.12.xx- 01.01.yy!
Legal Aspects
The following explanations refer to the greatest possible extend on commercial law from 1. World
countries, e.g. Middle-Europe, North-America. But dependent on the specific country there may be
clear differences in the local law!
The substantial characteristics of a (money)loan is the obligation of the lender to deliver to the
borrower a certain amount for a specific time by transfer of ownership (delivery-obligation) and the
borrower has the obligation to repay the amount at the end (re-payment obligation). Additionally it
is an essential attribute of the lender to leave the amount during the live-time of the loan at the
borrower (relinquish-obligation).
However, the interest is for a loan not necessarely to be defined, as exiting it may sound in the first moment. Because interest is not equal
the loan, it is a separate item, i.e. the compensation of the lender for the usage of capital (= loan) during a certain period of time. So, in
common affairs interest is just payable if they had been agreed. Basically. But: in most of the laws there is an additional clause which says
that in commercial business interest is payable also without a special agreement.
Interest has additionally fundamential legal characteristics: If an agreement for interest is missing, one may conclude that it is in fact not a
loan in common sense, hence a repayment of the loan is not an obligation! This has impact especially in delicate situations, like insolvency
of a group, where up- or cross-stream loans have been made between different legal firms; of course it is also an important topic for tax
reasons. That means, it’s also a transfer pricing matter.
Last but not least it has to be mentioned that in many countries there is no explicit duty to prepare a written loan agreement. For instance in
Switzerland art. 11 sect. 1 in connection with art. 312 OR. Even this happen in some laws it is very important to point out here that the
consequences of missing writings may lead to serious problems at the lender and also at the borrower!
Legal Questions
1.
Liability questions - wrong issued or booked loans my lead to serious problems!
2.
Tax questions - transfer pricing: regarding internal loans; dependent on the direction (see above) there may be too high or to low
interest rates applied and may be considered from the the tax departement as a hidden dividend.
3.
Documentation - is a written (legal binding) loan agreement issued and in case of prolongation, correct adjusted?
Contents of a Loan
Every on commercial basic principles based loan should consider the following points:
1.
Lender
2.
Borrower
3.
Date of Agreement
4.
Currency
5.
Amount
6.
Start- and Enddate
7.
Reference
8.
Nature of the loan (internal or external)
9.
Day count convention (Act/360, 30/360, Act/365, Act/Act)
10.
Interest definition (p.a., s.a.)
11.
Interst payment (fix, monthly, semi-annually etc.)
12.
Fix- or floating legs
13.
Account of the lender
14.
Account of the borrower
15.
A free text for remarks
16.
Interest fixing dates
17.
Authorized signatures
Snake-Pits in the interest calculation
Mainly corporates which have no specialized treasury software (e.g. our system STS) calculate the interest in Excel and make sometimes
errors in the interest calculation. In the following the main problem posings:
Day Count Convention
Depending on the currency and the duration of the loan there are different methods of calculating interest based on international best
practice standards.
Example: Short-Term Loan, EUR for 1/2 year, 31.12.15 - 30.06.16 (2016 is a lump leap year)
1.
Act/360
(1’000’000 x 1.0% x 182) / 360 x 100 = 5’055.56
2.
30/360
(1’000’000 x 1.0% x 180) / 360 x 100 = 5’000.00
3.
Act/365
(1’000’000 x 1.0% x 182) / 365 x 100 = 4’986.30
4.
Act/Act
(1’000’000 x 1.0% x 182) / 366 x 100 = 4’972.68
In this example for the short-term loan in EUR for 1/2 year the day count convention act/360 is correct. If others are applied, e.g. because of
a lack of professional knowledge, wrong interest is applied.
Time
We often saw in financial departments the problem that days are calculated wrong at all.
Example: A loan is agreed from Jan. 1st 2016 - Mar. 31st 2016 and is going to be prolongated until Jun. 30th 2016.
1.
01.01.16 - 31.03.16 and 01.04.16 - 30.06.16 = 90 days + 90 days = 180 days
-> that’s wrong in two ways:
a) Interest calculation starts just at the date when the funds are on the account of the borrower (valude date, not booking date). On
01.01.xx ni a year in most of the countries of the world this is no working day, hence there can’t be a credit on the account; earliest at
02.01.xx. But because 02.01.16 is a saturday (we assume, the loan is between a british- and a german company), the amount can be
credited earliest on 04.01.2016.
b) Between 31.03.16 and 01.04.2016 no interest was calculated.
2.
04.01.16 - 31.03.16 und 31.03.16 - 30.06.16 = 87 days + 91 days = 178 days.
Correct.
Interest Fixings
The most applied interest sources are the official fixings for instance LIBOR or EURIBOR. Those rates cover the period up to one year in
different time grids.
LIBOR: Overnight, 1 Week, 2 Weeks und then 1, 2, 3 ..12 Months
EURIBOR: 1 Week, 2 Weeks, 3 Weeks und then 1, 2, 3 .. 12 Months
Important to know is at a fixing that there is a difference between FIXING-DATE und VALUE-DATE. The Fixing-Date is always 2 working
days (of the currency, not the country) prior the date when funds are physically transferred.
Examples:
3.
01.01.16 -> Value Date Monday, 04.01.16 -> Zinsfixing = Wednesday, 30.12.2015
4.
15.03.16 -> Value Date Tuesday, 15.03.16 -> Zinsfixing = Friday, 11.03.16
Last but not least: always distinguish between booking and value-date!
Contact us, we would be glad to show you the possible opportunities!
often comprehensive questions arise which lead sometimes to serious problems because of a lack of technical knowledge and/or legal
understandings.
Fundamentials
Technical
This small mindmap shows that a loan has many facings. Dependent, what the goal of a loans is, many different details should be
considered carefully:
Technical Questions
1.
Interest source, e.g. from a newspaper or not approved google hits instead of a common market source - e.g. LIBOR, EURIBOR etc.
2.
Interest calculation, e.g. because of the currency and duration the correct day-count coventions need to be applied.
3.
Fundamential calculations, e.g. a loan which started at 30.06.xx and ends at 31.12.xx with a prolongation to 30.06.yy is calculated
30.12.xx - 31.12.xx and 01.01.yy - 30.06.yy. Here, one day is missing, the day from 31.12.xx- 01.01.yy!
Legal Aspects
The following explanations refer to the greatest possible extend on commercial law from 1. World
countries, e.g. Middle-Europe, North-America. But dependent on the specific country there may be
clear differences in the local law!
The substantial characteristics of a (money)loan is the obligation of the lender to deliver to the
borrower a certain amount for a specific time by transfer of ownership (delivery-obligation) and the
borrower has the obligation to repay the amount at the end (re-payment obligation). Additionally it
is an essential attribute of the lender to leave the amount during the live-time of the loan at the
borrower (relinquish-obligation).
However, the interest is for a loan not necessarely to be defined, as exiting it may sound in the first moment. Because interest is not equal
the loan, it is a separate item, i.e. the compensation of the lender for the usage of capital (= loan) during a certain period of time. So, in
common affairs interest is just payable if they had been agreed. Basically. But: in most of the laws there is an additional clause which says
that in commercial business interest is payable also without a special agreement.
Interest has additionally fundamential legal characteristics: If an agreement for interest is missing, one may conclude that it is in fact not a
loan in common sense, hence a repayment of the loan is not an obligation! This has impact especially in delicate situations, like insolvency
of a group, where up- or cross-stream loans have been made between different legal firms; of course it is also an important topic for tax
reasons. That means, it’s also a transfer pricing matter.
Last but not least it has to be mentioned that in many countries there is no explicit duty to prepare a written loan agreement. For instance in
Switzerland art. 11 sect. 1 in connection with art. 312 OR. Even this happen in some laws it is very important to point out here that the
consequences of missing writings may lead to serious problems at the lender and also at the borrower!
Legal Questions
1.
Liability questions - wrong issued or booked loans my lead to serious problems!
2.
Tax questions - transfer pricing: regarding internal loans; dependent on the direction (see above) there may be too high or to low
interest rates applied and may be considered from the the tax departement as a hidden dividend.
3.
Documentation - is a written (legal binding) loan agreement issued and in case of prolongation, correct adjusted?
Contents of a Loan
Every on commercial basic principles based loan should consider the following points:
1.
Lender
2.
Borrower
3.
Date of Agreement
4.
Currency
5.
Amount
6.
Start- and Enddate
7.
Reference
8.
Nature of the loan (internal or external)
9.
Day count convention (Act/360, 30/360, Act/365, Act/Act)
10.
Interest definition (p.a., s.a.)
11.
Interst payment (fix, monthly, semi-annually etc.)
12.
Fix- or floating legs
13.
Account of the lender
14.
Account of the borrower
15.
A free text for remarks
16.
Interest fixing dates
17.
Authorized signatures
Snake-Pits in the interest calculation
Mainly corporates which have no specialized treasury software (e.g. our system STS) calculate the interest in Excel and make sometimes
errors in the interest calculation. In the following the main problem posings:
Day Count Convention
Depending on the currency and the duration of the loan there are different methods of calculating interest based on international best
practice standards.
Example: Short-Term Loan, EUR for 1/2 year, 31.12.15 - 30.06.16 (2016 is a lump leap year)
1.
Act/360
(1’000’000 x 1.0% x 182) / 360 x 100 = 5’055.56
2.
30/360
(1’000’000 x 1.0% x 180) / 360 x 100 = 5’000.00
3.
Act/365
(1’000’000 x 1.0% x 182) / 365 x 100 = 4’986.30
4.
Act/Act
(1’000’000 x 1.0% x 182) / 366 x 100 = 4’972.68
In this example for the short-term loan in EUR for 1/2 year the day count convention act/360 is correct. If others are applied, e.g. because of
a lack of professional knowledge, wrong interest is applied.
Time
We often saw in financial departments the problem that days are calculated wrong at all.
Example: A loan is agreed from Jan. 1st 2016 - Mar. 31st 2016 and is going to be prolongated until Jun. 30th 2016.
1.
01.01.16 - 31.03.16 and 01.04.16 - 30.06.16 = 90 days + 90 days = 180 days
-> that’s wrong in two ways:
a) Interest calculation starts just at the date when the funds are on the account of the borrower (valude date, not booking date). On
01.01.xx ni a year in most of the countries of the world this is no working day, hence there can’t be a credit on the account; earliest at
02.01.xx. But because 02.01.16 is a saturday (we assume, the loan is between a british- and a german company), the amount can be
credited earliest on 04.01.2016.
b) Between 31.03.16 and 01.04.2016 no interest was calculated.
2.
04.01.16 - 31.03.16 und 31.03.16 - 30.06.16 = 87 days + 91 days = 178 days.
Correct.
Interest Fixings
The most applied interest sources are the official fixings for instance LIBOR or EURIBOR. Those rates cover the period up to one year in
different time grids.
LIBOR: Overnight, 1 Week, 2 Weeks und then 1, 2, 3 ..12 Months
EURIBOR: 1 Week, 2 Weeks, 3 Weeks und then 1, 2, 3 .. 12 Months
Important to know is at a fixing that there is a difference between FIXING-DATE und VALUE-DATE. The Fixing-Date is always 2 working
days (of the currency, not the country) prior the date when funds are physically transferred.
Examples:
3.
01.01.16 -> Value Date Monday, 04.01.16 -> Zinsfixing = Wednesday, 30.12.2015
4.
15.03.16 -> Value Date Tuesday, 15.03.16 -> Zinsfixing = Friday, 11.03.16
Last but not least: always distinguish between booking and value-date!
Contact us, we would be glad to show you the possible opportunities!
Loans
Loans - that’s something everybody seems to know and understand.
Not necessarely! The practice often shows considerable
comprehension questions.
Loans are considered generally often as fiddling, totally intelligible
and more over, as a simple financial agreement. But in practice
quite often comprehensive questions arise which lead sometimes to
serious problems because of a lack of technical knowledge and/or
legal understandings.
Fundamentials
Technical
(Please have a look to this site also on a Desktop-Screen and review
the Mind Map to undermentioned points, because this site is
optimized for Smartphones / Tablets)
Loans are segregated primary for
1.
Internal / External
2.
Type
3.
Currency
4.
Surety
•
Secondly by direction -> Down-/Cross-/Upstream;
•
Duration -> Short Term < 1 Year und Long Term > 1 Year;
•
Fix or floating interest;
•
Interest benchmark -> internal or external;
•
Interest environment -> Money Market or Capital Market;
•
Instruments -> from fix loans through Repos, Bonds up to
syndicated Loans;
•
Day Count
•
Kind of Loan -> 1:1 or Cash Pooling
•
Kind of Surety -> simple or complex Coventants
This small mindmap shows that a loan has many facings.
Dependent, what the goal of a loans is, many different details should
be considered carefully:
Technical Questions
1.
Interest source, e.g. from a newspaper or not approved google
hits instead of a common market source - e.g. LIBOR,
EURIBOR etc.
2.
Interest calculation, e.g.
because of the currency
and duration the correct
day-count coventions
need to be applied.
3.
Fundamential
calculations, e.g. a loan
which started at
30.06.xx and ends at
31.12.xx with a prolongation to 30.06.yy is calculated 30.12.xx
- 31.12.xx and 01.01.yy - 30.06.yy. Here, one day is missing,
the day from 31.12.xx- 01.01.yy!
Legal Aspects
The following explanations refer to the greatest possible extend on
commercial law from 1. World countries, e.g. Middle-Europe, North-
America. But dependent on the specific country there may be clear
differences in the local law!
The substantial characteristics of a (money)loan is the obligation of
the lender to deliver to the borrower a certain amount for a specific
time by transfer of ownership (delivery-obligation) and the borrower
has the obligation to repay the amount at the end (re-payment
obligation). Additionally it is an essential attribute of the lender to
leave the amount during the live-time of the loan at the borrower
(relinquish-obligation).
However, the interest is for a loan not necessarely to be defined, as
exiting it may sound in the first moment. Because interest is not
equal the loan, it is a separate item, i.e. the compensation of the
lender for the usage of capital (= loan) during a certain period of
time. So, in common affairs interest is just payable if they had been
agreed. Basically. But: in most of the laws there is an additional
clause which says that in commercial business interest is payable
also without a special agreement.
Interest has additionally fundamential legal characteristics: If an
agreement for interest is missing, one may conclude that it is in fact
not a loan in common sense, hence a repayment of the loan is not
an obligation! This has impact especially in delicate situations, like
insolvency of a group, where up- or cross-stream loans have been
made between different legal firms; of course it is also an important
topic for tax reasons. That means, it’s also a transfer pricing matter.
Last but not least it has to be mentioned that in many countries there
is no explicit duty to prepare a written loan agreement. For instance
in Switzerland art. 11 sect. 1 in connection with art. 312 OR. Even
this happen in some laws it is very important to point out here that
the consequences of missing writings may lead to serious problems
at the lender and also at the borrower!
Legal Questions
1.
Liability questions - wrong issued or booked loans my lead to
serious problems!
2.
Tax questions - transfer pricing: regarding internal loans;
dependent on the direction (see above) there may be too high
or to low interest rates applied and may be considered from
the the tax departement as a hidden dividend.
3.
Documentation - is a written (legal binding) loan agreement
issued and in case of prolongation, correct adjusted?
Contents of a Loan
Every on commercial basic principles based loan should consider the
following points:
1.
Lender
2.
Borrower
3.
Date of Agreement
4.
Currency
5.
Amount
6.
Start- and Enddate
7.
Reference
8.
Nature of the loan (internal or external)
9.
Day count convention (Act/360, 30/360, Act/365, Act/Act)
10.
Interest definition (p.a., s.a.)
11.
Interst payment (fix, monthly, semi-annually etc.)
12.
Fix- or floating legs
13.
Account of the lender
14.
Account of the borrower
15.
A free text for remarks
16.
Interest fixing dates
17.
Authorized signatures
Snake-Pits in the interest calculation
Mainly corporates which have no specialized treasury software (e.g.
our system STS) calculate the interest in Excel and make sometimes
errors in the interest calculation. In the following the main problem
posings:
Day Count Convention
Depending on the currency and the duration of the loan there are
different methods of calculating interest based on international best
practice standards.
Example: Short-Term Loan, EUR for 1/2 year, 31.12.15 - 30.06.16
(2016 is a lump leap year)
1.
Act/360
(1’000’000 x 1.0% x 182) / 360 x 100 = 5’055.56
2.
30/360
(1’000’000 x 1.0% x 180) / 360 x 100 = 5’000.00
3.
Act/365
(1’000’000 x 1.0% x 182) / 365 x 100 = 4’986.30
4.
Act/Act
(1’000’000 x 1.0% x 182) / 366 x 100 = 4’972.68
In this example for the short-term loan in EUR for 1/2 year the day
count convention act/360 is correct. If others are applied, e.g.
because of a lack of professional knowledge, wrong interest is
applied.
Time
We often saw in financial departments the problem that days are
calculated wrong at all.
Example: A loan is agreed from Jan. 1st 2016 - Mar. 31st 2016 and
is going to be prolongated until Jun. 30th 2016.
1.
01.01.16 - 31.03.16 and 01.04.16 - 30.06.16 = 90 days + 90
days = 180 days
-> that’s wrong in two ways:
a) Interest calculation starts just at the date when the funds are
on the account of the borrower (valude date, not booking
date). On 01.01.xx ni a year in most of the countries of the
world this is no working day, hence there can’t be a credit on
the account; earliest at 02.01.xx. But because 02.01.16 is a
saturday (we assume, the loan is between a british- and a
german company), the amount can be credited earliest on
04.01.2016.
b) Between 31.03.16 and 01.04.2016 no interest was
calculated.
2.
04.01.16 - 31.03.16 und 31.03.16 - 30.06.16 = 87 days + 91
days = 178 days.
Correct.
Interest Fixings
The most applied interest sources are the official fixings for instance
LIBOR or EURIBOR. Those rates cover the period up to one year in
different time grids.
LIBOR: Overnight, 1 Week, 2 Weeks und then 1, 2, 3 ..12 Months
EURIBOR: 1 Week, 2 Weeks, 3 Weeks und then 1, 2, 3 .. 12 Months
Important to know is at a fixing that there is a difference between
FIXING-DATE und VALUE-DATE. The Fixing-Date is always 2
working days (of the currency, not the country) prior the date when
funds are physically transferred.
Examples:
3.
01.01.16 -> Value Date Monday, 04.01.16 -> Zinsfixing =
Wednesday, 30.12.2015
4.
15.03.16 -> Value Date Tuesday, 15.03.16 -> Zinsfixing =
Friday, 11.03.16
Last but not least: always distinguish between booking and value-
date!
Contact us, we would be glad to show you the possible
opportunities!
and more over, as a simple financial agreement. But in practice
quite often comprehensive questions arise which lead sometimes to
serious problems because of a lack of technical knowledge and/or
legal understandings.
Fundamentials
Technical
(Please have a look to this site also on a Desktop-Screen and review
the Mind Map to undermentioned points, because this site is
optimized for Smartphones / Tablets)
Loans are segregated primary for
1.
Internal / External
2.
Type
3.
Currency
4.
Surety
•
Secondly by direction -> Down-/Cross-/Upstream;
•
Duration -> Short Term < 1 Year und Long Term > 1 Year;
•
Fix or floating interest;
•
Interest benchmark -> internal or external;
•
Interest environment -> Money Market or Capital Market;
•
Instruments -> from fix loans through Repos, Bonds up to
syndicated Loans;
•
Day Count
•
Kind of Loan -> 1:1 or Cash Pooling
•
Kind of Surety -> simple or complex Coventants
This small mindmap shows that a loan has many facings.
Dependent, what the goal of a loans is, many different details should
be considered carefully:
Technical Questions
1.
Interest source, e.g. from a newspaper or not approved google
hits instead of a common market source - e.g. LIBOR,
EURIBOR etc.
2.
Interest calculation, e.g.
because of the currency
and duration the correct
day-count coventions
need to be applied.
3.
Fundamential
calculations, e.g. a loan
which started at
30.06.xx and ends at
31.12.xx with a prolongation to 30.06.yy is calculated 30.12.xx
- 31.12.xx and 01.01.yy - 30.06.yy. Here, one day is missing,
the day from 31.12.xx- 01.01.yy!
Legal Aspects
The following explanations refer to the greatest possible extend on
commercial law from 1. World countries, e.g. Middle-Europe, North-
America. But dependent on the specific country there may be clear
differences in the local law!
The substantial characteristics of a (money)loan is the obligation of
the lender to deliver to the borrower a certain amount for a specific
time by transfer of ownership (delivery-obligation) and the borrower
has the obligation to repay the amount at the end (re-payment
obligation). Additionally it is an essential attribute of the lender to
leave the amount during the live-time of the loan at the borrower
(relinquish-obligation).
However, the interest is for a loan not necessarely to be defined, as
exiting it may sound in the first moment. Because interest is not
equal the loan, it is a separate item, i.e. the compensation of the
lender for the usage of capital (= loan) during a certain period of
time. So, in common affairs interest is just payable if they had been
agreed. Basically. But: in most of the laws there is an additional
clause which says that in commercial business interest is payable
also without a special agreement.
Interest has additionally fundamential legal characteristics: If an
agreement for interest is missing, one may conclude that it is in fact
not a loan in common sense, hence a repayment of the loan is not
an obligation! This has impact especially in delicate situations, like
insolvency of a group, where up- or cross-stream loans have been
made between different legal firms; of course it is also an important
topic for tax reasons. That means, it’s also a transfer pricing matter.
Last but not least it has to be mentioned that in many countries there
is no explicit duty to prepare a written loan agreement. For instance
in Switzerland art. 11 sect. 1 in connection with art. 312 OR. Even
this happen in some laws it is very important to point out here that
the consequences of missing writings may lead to serious problems
at the lender and also at the borrower!
Legal Questions
1.
Liability questions - wrong issued or booked loans my lead to
serious problems!
2.
Tax questions - transfer pricing: regarding internal loans;
dependent on the direction (see above) there may be too high
or to low interest rates applied and may be considered from
the the tax departement as a hidden dividend.
3.
Documentation - is a written (legal binding) loan agreement
issued and in case of prolongation, correct adjusted?
Contents of a Loan
Every on commercial basic principles based loan should consider the
following points:
1.
Lender
2.
Borrower
3.
Date of Agreement
4.
Currency
5.
Amount
6.
Start- and Enddate
7.
Reference
8.
Nature of the loan (internal or external)
9.
Day count convention (Act/360, 30/360, Act/365, Act/Act)
10.
Interest definition (p.a., s.a.)
11.
Interst payment (fix, monthly, semi-annually etc.)
12.
Fix- or floating legs
13.
Account of the lender
14.
Account of the borrower
15.
A free text for remarks
16.
Interest fixing dates
17.
Authorized signatures
Snake-Pits in the interest calculation
Mainly corporates which have no specialized treasury software (e.g.
our system STS) calculate the interest in Excel and make sometimes
errors in the interest calculation. In the following the main problem
posings:
Day Count Convention
Depending on the currency and the duration of the loan there are
different methods of calculating interest based on international best
practice standards.
Example: Short-Term Loan, EUR for 1/2 year, 31.12.15 - 30.06.16
(2016 is a lump leap year)
1.
Act/360
(1’000’000 x 1.0% x 182) / 360 x 100 = 5’055.56
2.
30/360
(1’000’000 x 1.0% x 180) / 360 x 100 = 5’000.00
3.
Act/365
(1’000’000 x 1.0% x 182) / 365 x 100 = 4’986.30
4.
Act/Act
(1’000’000 x 1.0% x 182) / 366 x 100 = 4’972.68
In this example for the short-term loan in EUR for 1/2 year the day
count convention act/360 is correct. If others are applied, e.g.
because of a lack of professional knowledge, wrong interest is
applied.
Time
We often saw in financial departments the problem that days are
calculated wrong at all.
Example: A loan is agreed from Jan. 1st 2016 - Mar. 31st 2016 and
is going to be prolongated until Jun. 30th 2016.
1.
01.01.16 - 31.03.16 and 01.04.16 - 30.06.16 = 90 days + 90
days = 180 days
-> that’s wrong in two ways:
a) Interest calculation starts just at the date when the funds are
on the account of the borrower (valude date, not booking
date). On 01.01.xx ni a year in most of the countries of the
world this is no working day, hence there can’t be a credit on
the account; earliest at 02.01.xx. But because 02.01.16 is a
saturday (we assume, the loan is between a british- and a
german company), the amount can be credited earliest on
04.01.2016.
b) Between 31.03.16 and 01.04.2016 no interest was
calculated.
2.
04.01.16 - 31.03.16 und 31.03.16 - 30.06.16 = 87 days + 91
days = 178 days.
Correct.
Interest Fixings
The most applied interest sources are the official fixings for instance
LIBOR or EURIBOR. Those rates cover the period up to one year in
different time grids.
LIBOR: Overnight, 1 Week, 2 Weeks und then 1, 2, 3 ..12 Months
EURIBOR: 1 Week, 2 Weeks, 3 Weeks und then 1, 2, 3 .. 12 Months
Important to know is at a fixing that there is a difference between
FIXING-DATE und VALUE-DATE. The Fixing-Date is always 2
working days (of the currency, not the country) prior the date when
funds are physically transferred.
Examples:
3.
01.01.16 -> Value Date Monday, 04.01.16 -> Zinsfixing =
Wednesday, 30.12.2015
4.
15.03.16 -> Value Date Tuesday, 15.03.16 -> Zinsfixing =
Friday, 11.03.16
Last but not least: always distinguish between booking and value-
date!
Contact us, we would be glad to show you the possible
opportunities!
