Configuring the Interest Rate driver

The Interest Rate driver contains projected interest rates and FTP rates that cash flow forecaster and balance sheet planning templates use. Interest rate drivers are unique to each file group. The Cash Flow Forecaster Drivers is discussed in detail in separate documentation.

The InterestRates sheet contains 12 columns for the base year and 60 columns to handle up to five future years of interest rate projections. It also contains five sections: Interest Rates, Custom Interest Rates, FTP, Yield Curve Interpolation Points for Cash Flow Forecaster, and Interpolated FTP Yield Curve for Cash Flow Forecaster.

The Interest Index section is populated by an Axiom query that queries all the interest index codes found in the InterestIndex table. Enter interest rates only in rows that are used in the new volume projections and for interpolating an FTP yield curve. Populate the Plan Year Forecast columns for every calendar year of the planning horizon. Optionally, populate the historical interest rates in columns labeled Base Year Actual.

Entering interest rates in the Custom Interest Rates section is optional.

Enter rates in the FTP section only if FTP budgeting is in scope. This section uses FTP rates for non-maturity accounts like credit cards, lines of credits, demand deposits, savings and money market deposits, other assets and other liabilities. You can also use the FTP section to assign custom FTP rates to term maturity accounts that use the Cash Flow calculation method (like CDs and loans) to apply the rate to new volume projections.

Enter rates in the Yield curve interpolation points for Cash Flow Forecaster section only if budgeted FTP is required and the Cash Flow Forecaster Drivers are used to calculate cash flow FTP rates (on term adjustable rate instruments that have a rate reset event within the cash flow forecast horizon). Select the yield curve index, from which the FTP yield curve interpolation points are drawn, to calculate an interpolated FTP yield curve. Then set the Interpolation points, which are published yield curve durations between which Axiom will interpolate yield curve rates. These will serve as interpolation points between which Axiom will linearly interpolate yield curve rates.

Configuring Interest Rate Drivers

To configure Interest Rate Drivers:

  1. From the Command Center home page, click Financial Planning.
  2. Open the budget, scenario, or forecast for which to edit the driver.
  3. Click the Drivers & Assumptions tab.

  4. Click the Interest Rate Drivers link.

    NOTE: The driver opens in the Desktop Client and displays the BUDXXXX Interest Rate Drivers sheet by default.

  5. Scroll to the Interest Index section and populate each row used for new volume projections and for interpolating an FTP yield curve.
    1. Enter interest rates in the Plan Year Forecast columns for every calendar year of the planning horizon.
    2. Optionally enter the historical interest rates in columns labeled Base Year Actual.
  6. Scroll to the Custom Interest Rates section and optionally enter custom interest rate forecasts, as follows:
    1. Double-click Add New Row(s) to add one or more rows to the Custom Interest Rates section.
    2. Enter an identifier in the Index Code column for each new row.
    3. Enter a description in the Description column for each new row.
    4. Enter interest rates in the Base Year Actual and Plan Year Forecast columns.
  7. If FTP budgeting is in scope, scroll to the FTP section and enter key interest rates for assigned method and new volume accounts, as follows:
    1. Double-click Add New Row(s) to add one or more rows to the FTP section.
    2. Enter an identifier in the Index Code column for each new row.
    3. Enter an description in the Description column for each new row.
    4. Enter interest rates in the Base Year Actual and Plan Year Forecast columns.
  8. If FTP budgeting is required and cash flow forecasting is used, scroll to the Yield curve interpolation points for Cash Flow Forecasterand enter interpolation point interest rates, as follows:
    1. Double-click Select Index Group and select the yield curve index from which the FTP yield curve interpolation points will be selected to calculate an interpolated FTP yield curve. Then set the Base Year Actual and Plan Year Forecast rates.
    2. Select up to 12 interpolation points per index group, in ascending order of duration, by double-clicking each Interpolation Point. Then set the Base Year Actual and Plan Year Forecast rates.

  9. You do not need to configure the FTP yield curve for Cash Flow Forecaster section.

    NOTE: The Interpolated FTP yield curve for Cash Flow Forecaster will only work when the file group variable FTPCalcFlag is set to Yes and the Cash Flow Forecaster is installed.

  10. Click the Save button on the Axiom ribbon to save inputs to the database.
  11. Close the Interest Rates file when input is complete.