SAP Treasury & Risk Management-End User Training

Money Market Instruments

Interest Rate Instruments- End User Training

Interest Rate Instruments Functionality

• An interest rate instrument is a money market transaction with additional structural characteristics, such as variable interest and installment repayment.

End to End Business Process for Interest Rate Instrument

Create Interest Rate Instrument

Transaction Code: FTR_Create

• Reference Interest Rate: When calculating the variable interest, the reference interest rate is normally a money market interest rate.
• Frequency: It specifies interest Payment frequency – End of Period, Monthly, quarterly etc.

Interest rate instrument 5000000000104 in company code 1000 is created.

Settle Interest Rate Instruments

Transaction Code: FTR_EDIT

Here we review the above transaction. This ensures dual verification of transaction. If everything is correct it is saved, which results in settlement.

Post Inception Flows

Transaction Code: TBB1

This will post FI inception documents- If Investment, Investment account debit and Bank Clearing Account credited. This explained in detail in the course SAP Treasury and Risk Management

Accounting Document

Post Month End Interest Accrual entries.

Here we will post the accrued-on Interest rate instruments. We will use a reset method which will post interest on the last day of the month and then reverse it on 1^st day of next month. Total interest from inception to maturity will be posted to the Interest account on interest rate instrument maturity.

Transaction code: TPM44

Accrued Interest Posted on 29.02.2024 as shown below.

It is reversed om 01.03.2024 as shown below.

Please refer to below link for explanation: SAP Treasury & Risk Management-Introduction

SAP Treasury and Risk Management Course

Variable Reference Interest Rate Update

Variable Reference Interest Rate are received from Bloomberg or any other 3^rd party provider. These are updated in system automatically thorough interface with Bloomberg or these 3^rd party providers. In our case we will manually update variable reference interest rate

Transaction Code: JBIRM

Current Interest Rate is 2.18%

Reference Interest Rate is EUREUR01YM

WE entered Rate 10% from 01.03.2024.

Now we run Transaction code TJ05 and then check the Interest Payments for this deal in transaction code FTR_EDIT as below. We can Reference Interest Rate updated to 10% in the contract. Further Interest Payments recalculated based on new Reference Interest rate

Repayment on Term Deposit / Interest Rate Instrument maturity

Transaction Code: TBB1

Maturity date is 31.05.2024. So, we will run Transaction code TBB1 on 30.05.2024. This will post FI entries on loan maturity.

Investment Repayment FI document

Full Interest received on investment FI document.

This complete end to end business process and training on Interest rate instruments with variable reference interest rate. Same process for fix interest rate except rate adjustment steps (JBIRM, TJ05) not applicable

Please take course SAP Treasury & Risk Management for videos and details on Treasury business process and configuration