BIAN Working Group Lending

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_{Published on July 5, 2011}

Incoming Payment Allocation

Summary
The borrower has to pay instalments, payoffs and other payments for due receivables based on one or more loan contracts as agreed between a borrower and a bank. Sometimes a borrower pays in advance, before a payment plan item becomes due.

A payment can be triggered by the bank (e.g. direct debit). The borrower or a payer party triggers the payment (e.g. bank transfer). In general a borrower pays a due amount in total. The borrower pays one amount for all due receivables (e.g. sum of interest, repayment, charge, insurance premium). Incoming Payment Allocation has the responsibility to allocate an incoming payment amount to balance receivables. Receivables are cleared by a payment. In some countries there are legal requirements which define the order of the payment allocation. For example interest has to be paid before repayment if the amount paid is not sufficient to balance all due receivables.

A bank can specify rules for the incoming payment allocation. Also the borrower can give an instruction (for example in a note to a payee of a payment order) for which purpose the payment should be used. The borrower can for example transfer an extraordinary payment amount which should be used as curtailment (early partial payoff) of one of the loans. An extraordinary payment is a payment which is usually made in addition to the payment plan. Allocation of payments for other type of contracts (other than loans) e.g. leasing contracts is also included in this sub domain.

Incoming Payment Allocation receives a request to allocate an incoming payment. It then distributes funds according to the allocation rules and directives. Clearing of the due items is triggered as well as the creation of a payment order to balance the receivables. A request is usually created by the payment entry/item on a bank account which is part of position management.

The (periodic) allocation of incoming payments runs on incoming payment allocation requests, and determines whether an unspecified payment is to be used to clear due items, for curtailment, or as an advance payment. It also monitors the allocation, and triggers the posting of the specified payment on bank accounts via a payment order processed by Payment Execution, Clearing and Settlement. Payment allocation is a process in which incoming payments from a clearing account are allocated to one or more loan accounts by means of payment order. The payment allocation is performed in response to an Incoming Payment Allocation Request.

Payment Allocation distributes incoming payments according to specific rules and directives while taking into consideration due items. The possibility of overpayments must be catered for. The allocation process involves splitting and specifying the payment details.

Payment Allocation triggers transfers of a payment from the clearing bank account to designated bank accounts.

Payment allocation also handles the exceptions in the allocation process and delegates the exception to another sub domain.

Customer Loan Operational Contract Management

Summary
A bank sells banking products to customers within the Sales & Services business area. When a customer buys a banking product a sales agreement is signed by both parties. Typically a sales agreement includes several base products. An example is an agreement for a consumer loan which consists of a loan itself and residual debt insurance. Once the sales agreement has been signed within Sales &
Services, the control is handed over to Operation & Execution business area to operate parts of the sales agreement in different sub domains.

Customer Loan Operational Contract Management is responsible for operations involving a Customer Loan Operational Contract which is the focus object of the sub domain. The residual debt insurance contract is handed over to another sub domain (e.g. Insurance Taken Management). Also an operational contract could be created in an appropriate sub domain that operates the cross contract fulfillment dependencies.

The customer loan operational contract can be changed during the lifetime of a contract. A change of an operational contract is usually triggered by a change of a corresponding sales agreement. Customer Loan Operational Contract Management supports change processes by providing services for steps of a specific business process (e.g. payment plan change, payoff).

There is an understanding within BIAN to make a clear distinction of terms and therefore will use the term “contract” within Operation & Execution” business area and the term “agreement” within “Sales & Services” business area.

Customer Loan Operational Contract Management is responsible to operate contracts involving loans for customers. Customer Loan Operational Contract Management delegates task to other business areas and business (sub) domains (e.g. financial accounting, position management). The capability of the sub domain Customer Loan Operational Contract Management is to manage customer loan contract operational contract and requests to change a loan operational contract during the lifecycle of a loan (e.g. payment plan change, payoff).

The BIAN Service Landscape is currently not complete, and therefore only the business area or the business domain is referenced.

_{Published on June 22, 2010}

Agreement Management

Summary
Using the operations of the sub domain ‘Agreement Management’, agreement documents are controlled, checked and collateral is assigned.
The original offer is split into one or more agreements which are processed separately. Based on an agreement the operational contract is created and, if required, the decided subsidy application is processed. The last operation of the process is the mailing of business partner documents.

This sub domain also supports operations for changing existing agreements based on business partner request. The original offer may not be involved in this processing and will stay unchanged.

Offer Management

Summary
The Sub Domain 'Offer Management' presents the whole life cycle of an offer. An offer is a summary of the agreements, at the current time, which the Bank agreed with the customer. Thus, the offer exists only till the decision process. With the signing of the documents ending the life cycle of the offer and the subsequent activities are controlled by the agreements. At this point the offer is converted into an agreement.

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