Compensating Balances for Business Loans
The Compensating Balances for Business Loans DNAapp enables Financial Institutions to offer business customers preferred commercial loan rates based on their average deposit balances without placing a "hold" on the linked deposit accounts. Using this DNAapp, commercial lenders can link a customer/member's deposit accounts to a loan with a contractual average balance threshold ("compensating balance" or "offsetting balance") that provides a means for adjusting the loan rate based on whether the borrower stays in compliance with this agreed-upon balance threshold.
The DNAapp lets commercial lenders link a wide range of deposit products, including time deposits, savings accounts, and even more volatile operating accounts to a commercial loan and require the borrower to maintain an average linked balance threshold to maintain a preferred loan rate. If the average linked deposit balance falls below this threshold, the lender can choose to have the loan rate adjusted to a higher rate with a single click. The lender also has the freedom to easily lower rates back should the average deposit account balance be raised to a sufficient threshold, or in either case, choose not to adjust rates at all.
The Compensating Balances for Business Loans DNAapp helps offset the cost of loans by encouraging borrowers to maintain higher balances in their linked deposit accounts while simultaneously giving institutions a way to generate additional interest income if the threshold is not met. The DNAapp provides the Financial Institution with flexible setup, review, revenue generating possibilities and risk management, which include:
The ability to link a variety of deposit accounts to a loan account to be used in average balance calculations.
Inclusion of additional deposit accounts beyond the tax owner if desired, which means small businesses such as sole proprietors can link personal accounts, if the Financial Institution allows.
Financial Institution flexibility to set an average balance calculation period (i.e. 30 days, 60 days).
A review screen that can be filtered by Financial Institution or Commercial Lender for portfolio analysis, so the commercial Lender to review this data from a single screen at any time to help monitor the relationship.
Loan account-level balance threshold and rate adjustment variables.
Data display of pertinent loan information for these loan accounts, including current and "penalty" rates, average linked deposit account balances, and threshold information.
Commercial Lender control for each account relationship so the Lender can review data and make the decision on whether to adjust the rate.
Single-click processing to update or revert a loan account rate should the average deposit balance fall/below the threshold established for that relationship.
Option to allow either multiple incremental rate adjustments (increase and decrease) or only a “one up, back down” rate adjustment.
Full activity audit trail and reporting capabilities.
Built-in standard authorization security for both inquiry-only and updating capability.
- Ability to change interest rate changes online or via scheduled batch application.
NOTE: This app is not available to Data Center clients.
- This app is not available to Data Center clients
- DNA® 4.2.2 or higher
- NET Framework 4.5.2
- Core API 1.4.1 or higher (available for download from the Extranet at http://extranet.opensolutions.com/Lists/Downloads/Core%20API.aspx)
- The Fiserv Core Api Batch Start DNAapp must be installed in DNA® first. This DNAapp is a free application that may be downloaded from the DNAappstore:
- This application provides the ability to launch DNA® batch applications that require updating the DNA® application through Core API (Application Programming Interface). This application will create an authentication ticket associated with the User. This authentication ticket may be used during validation by a batch application.
- Following installation of this DNAapp, the User must login to DNA® and run the Core API Batch Start DNAapp from Batch > Run Queues > Core API Batch Start DNAapp.
- The Batch Start DNAapp is required to always be initiated on the same effective day prior to running the CompensatingBalAdj.sqt updating.
- The Compensating Balance Interest Rate Adjustment batch application should be set up to run using the normal queue setup. To be able to run the application, both authorizations of CoreAPI 7719 and the 'ARAU - Adjust AcctRateHist App Auth' authorization profile need to be added to the appropriate User (the User who ran the Core API Batch Start routine as shown above to create the authentication ticket).