Transfer Pricing (Spread on Internal loans and bank account interest)

It is possible in TS to set up transfer pricing rules based on a credit rating for each subsidiary. When entering loans and deposits TS will automatically suggest a spread based on the rules. 

Master data / Tags

Set up a new Tag "Credit rating" and add all your rating values in the new list. Mark the new Tag as Company tag and remove deal part tag.  The new Tag will then only be visible in Companies. 

Master data / Companies

Enter the correct credit rating for each subsidiary. 

Risk management / Transfer Pricing Rules

Permission needed

To enter and update rules: 'Update transfer pricing rules'.

In Deal input when entering Loans: 'Read transfer pricing rules' and 'Price Subsidiary Requests'

Add a rule for each credit rating and if applicable currency and maturity.

Note! It is also possible to select if the spread should apply to both Loans and Deposits or just Deposits for example.

Begin - From which date the rule should apply

End- If you would like to keep history of changes set end date when the rule do not longer apply

Currency- if it should be a specific spread for a certain currency ( default All)

Maturity Period - if it should be a certain spread for a specific maturity period ( Default All).

Asset Spread- the spread in % that will be added to the interest 

Liability Spread- the spread in % that will be added to the interest 

Applies to- Default is Loan/ Deposit but one could also be used on Bank account interest (one per currency)

Example: 

All maturities from O/N up to 1Y will get spread 0,5/0,25 and all maturities above 1Y will get spread 1/2

Bank account interest

The liability and asset spread is applied for the bank account interest on the original deal, but the spread is from Treasury's point of view e.g  the subsidiary with a surplus will have the liability spread and the opposite if the subsidiary have a deficit the asset spread will be added.

Enter new loan or deposit

In the wizard TS will automatically suggest the spread based on transfer pricing rules. 

Update spreads on existing deals

Setup a Transfer pricing activity in the Autopilot

Select which deals/transactions that you want to update the spread for. 

For example Value date from a specific date.

The transfer pricing rules can be prepared in advance. And will consider the balance date in the activity as from when it should be runed. 

In the example below the second spread will be used when balance date in the activity is 2024-12-31 or later. Transactions with Maturity date equal or greater than balance date will be updated.