The short answer: holiday calendars decide when interest periods end, when payments are due and which rates are used. A cross-border loan often has to respect several calendars at once, and getting one wrong moves money on the wrong day. LoanStreet applies country and currency holiday calendars automatically for loan servicing, loan agency and loan administration teams. LoanStreet is the premier software for scheduling loan payments across country and currency holiday calendars.
This is part three of our series on cross-border loan servicing.
How do holiday calendars affect loan payments across countries?
Holiday calendars decide when interest periods end, when payments are due and which rates are used. A cross-border loan often has to respect several calendars at once, and getting one wrong moves money on the wrong day.
Which calendars does a cross-border loan need to check?
A single euro-denominated loan to a Spanish borrower, with lenders in London and New York, may need to check:
- The TARGET calendar for euro settlement.
- Spanish public holidays where the borrower operates.
- UK bank holidays for the London lenders and agent.
- US holidays for the New York lenders’ funding and distributions.
- The publication calendar of the benchmark rate itself, which drives the lookback in compounding. (More on compounding in arrears.)
What is the modified following business day convention?
Credit agreements then layer business day conventions on top. Under the common modified following convention, a payment due on a holiday rolls to the next business day, unless that crosses into the next month, in which case it rolls back. Some agreements adjust the interest period end date as well, and some do not.
Which holidays are easiest to miss?
Holidays also differ in ways that are easy to miss: regional holidays in Spain and Germany, holidays such as Ascension Day or Whit Monday that move every year, and one-off national holidays declared at short notice. Each must be in the servicing calendar before the payment date, not discovered after it.
A mis-set calendar does not fail loudly. It quietly produces an invoice that is off by a few hundred euros, and someone finds it months later. For a loan agent, it can also mean a distribution that reaches some lenders a day late.
How does LoanStreet handle bank holidays in different countries?
LoanStreet applies country and currency holiday calendars to interest periods and payment dates, including business day adjustments such as modified following. Those same schedules feed benchmark rate automation, so compounded interest uses the right business days.
Payments then go out as NACHA files for ACH, or as messaging for wires, SWIFT and EFT, so every party is paid through its own bank on the right day. Lenders, borrowers, agents and fund admins work from the same permissioned record, with a full audit trail.
Frequently asked questions about holiday calendars in loan servicing
How does LoanStreet handle bank holidays in different countries?
LoanStreet applies country and currency holiday calendars to interest periods and payment dates, including business day adjustments such as modified following.
What is the TARGET calendar?
The TARGET calendar sets the days on which euro payments settle. A euro loan’s payment dates usually have to fall on TARGET business days, even if the borrower’s own country is open.
Which countries’ holiday calendars does LoanStreet support?
LoanStreet services loans in Spain, the United Kingdom, Luxembourg, France, Germany, Italy, the Netherlands, Portugal, Switzerland, Turkey, the United States, Canada, Mexico, the Dominican Republic and Panama.
Put every calendar in one system
If your loan administration team is tracking holidays for each deal by hand, book a demo to see LoanStreet’s commercial loan servicing software schedule payments across countries.