Base rate update

To make the floating interest rate dynamic, you must update the base rate value as it changes over time. Here, you can learn how to manage such base rate updates so that they are applied accurately.

The process of introducing the new base rate value consists of two steps:

1. Manually adding the new base rate fixing,

2. Automatically applying the new base rate value for interest calculation.

Adding the new base rate fixing

To add new base rate fixing, follow the instructions in the Base interest rate guide.

The base rate fixing date must be in the future. For example, if today's date is D, the earliest base rate fixing date can be D+1.

Automatic application of the new base rate fixing

Below are the high-level steps for automatically applying the new base rate, explained with a numerical example.

Let's assume you have made in the past the following configuration:

• Selected the margin type value fixed percentage that is subtracted from the base rate,

• Set the default margin rate value to 2%,

• Fixed the base rate to 5%.

It means the effective interest rate applied for the account interest rate calculation is 3%.

Today, on day D, you will set a new base rate of 7%, with the fixing date tomorrow (D+1).

During the day change process, transferring banking day from D to D+1, the following activities will be performed.

• Calculating interest accruals for today with a current effective interest rate of 3%.

• Discovering new base rate fixing 7% for the next day D+1.

• Calculating the new effective interest rate 7% - 2% = 5% for that account type interest method.

• Applying the new effective interest rate of 5% for accounts using this account type interest method.

During the next day change process, transferring banking day from D+1 to D+2, interest accruals for D+1 are calculated with an effective interest rate of 5%.

You may create base rate fixing in the distant future, like D+3, D+6, etc. In that case, the activities described above will also occur in the future on the day changed from the previous day to the rate-fixing date (respectively D+2 -> D+3 and D+5 -> D+6).