Decision on the Calculation and Reporting of the Effective Interest Rate on Loans and Deposits

Pursuant to Article 44 paragraph 2 item 3 of the Central Bank of Montenegro Law (OGM 40/10, 46/10, 06/13, 70/17), Article 211 of the Law on Credit Institutions (OGM 72/19, 8/21) and Article 27 paragraph 8 of the Consumer Credit Law (OGM 35/13), the Council of the Central Bank of Montenegro, at its meeting held on 28 December 2021, passed the following DECISION on the calculation and reporting of the effective interest rate on loans and deposits
Article 1
This Decision shall prescribe the manner of calculating and reporting the lending effective interest rates on loans and deposit effective interest rate on received deposits, as well as informing the clients on those effective interest rates.
Article 2
The Decision shall be applied by:

credit institutions, for loans, including consumer loans and received deposits;
microcredit financial institutions, for consumer loans, and
other creditors and credit intermediaries, for lending and intermediation services
in granting consumer loans pursuant to the law regulating consumer loans.
financial leasing providers for contracts to which provisions of the Law on
consumer loans are applied.
Article 3
Terms used in this Decision shall have the following meanings:
“creditor” means a credit institution, microcredit financial institution, or any
person who grants consumer loans pursuant to the law regulating consumer loans;
“depository” means a credit institution;
“customer” means a client of a credit institution within the meaning of the law
regulating operations of credit institutions, consumer of services of a microcredit financial institution within the meaning of the law regulating operations of microcredit financial institutions, and a consumer within the meaning of the law regulating consumer loans;
“Compound interest account” means the interest account where the
calculated interest for the first accounting period is added to the initial principal, and in the next accounting period interest is calculated on the initial principal increased by the interest amount from the first period, and in each subsequent interest period, interest is calculated on the remaining principal increased by calculated interest from the previous interest period, i.e. interest is calculated on interest (so-called anatocism).
“Decursive interest calculation” means calculation whereby interest is
calculated and imputed to the principal, i.e. paid at the end of the accounting period. With this method interest is calculated at the end of the period from the

initial amount, i.e. from the principal at the beginning of the basic capitalization period.
6) “Discounting” means resuming all future inflows and outflows to the current
value based on specific loan or deposit agreement.
7) “Cash collateral” means loan security instrument in cash deposited with the
credit institution, in the manner defined in the loan agreement;
8) “Loan repayment plan” means a scheduled summary of all chronologically
presented cash flows and outflows arising from loan agreement with the purpose of informing customers and creditors, i.e. updating the realization of their rights and obligations.
9) “Deposit payoff plan” means a scheduled summary of all chronologically
presented cash flows and outflows arising from deposit agreement with the purpose of informing customers and depositories, i.e. updating the realization of their financial rights and obligations.
10) “Maturity period” means part of accounting period that remaining from the
moment of monitoring specific loan or deposit up to the moment of its final collection or payoff determined in the agreement between customer and creditor/depositor.
Article 4
Lending effective interest rate shall report the expenses paid by a customer to the creditor when granting and during the loan repayment, while the deposit effective interest rate shall report the expenses paid by a depository realised through payoffs to the client on the basis of received deposit. Effective interest rate shall report total loan/deposit expenses, expressed as an annual percentage of the total amount of loan/deposit.
Article 5
The manner of calculating and reporting effective interest rate on loans and deposits is based on compound interest account, decursive calculation, and discounting based on calendar number of days of the month and of the year. Effective interest rate on loans with cash collateral shall be additionally adjusted by a single equivalent of discounted cash flows and outflows based on cash collateral. Effective interest rate shall be reported on the annual basis, with two decimals, rounding up to the second decimal.
Article 6
Information on effective interest rates on loans and deposits, published by creditors or depositaries in their premises, as well as in commercials and advertisements through public media, brochures and the like that inform, directly or indirectly, on effective interest rate or other amount forming a part of the loan or deposit price, must include effective interest rate corresponding to the nominal interest rates.

Effective interest rate shall not be less prominent than other information on loan or deposit and, when published, the term “effective interest rate” must be used, or the abbreviation “EIR” if the term is repeated. The information on the effective interest rate shall be disclosed to the customer in writing before accepting the offer or prior to signing the loan or deposit agreement. Informing the customer on the effective interest rate to consumer loans shall be done using the form for informing on the consumer loan, determined by the specific secondary legislation passed by the Central Bank, pursuant to the law regulating consumer loans. Informing the on the effective interest rate to deposits and loans that do not belong to the category of consumer loans may be done using the form from paragraph 4 above, or in other appropriate manner.
Article 7
If variable interest rate is agreed in the loan/deposit agreement, creditor/depository shall inform the client the change thereof prior to its implementation by posting a visible notification in the creditor’s premises, by email or otherwise specified by the agreement. By way of derogation from paragraph 1 above, notification on the interest rate change for consumer loan beneficiaries shall be performed in accordance with the law governing consumer credits.
Article 8
When concluding a loan or deposit agreement, the loan repayment plan or the deposit payoff plan shall be compiled containing clearly defined effective interest rate, and one copy shall be delivered to the customer, and one copy will be kept in the creditor’s or depository’s documentation.
Article 9
Loan or deposit agreement shall contain corresponding provision that shall clearly state that the customer is informed on loan or deposit terms and effective interest rate, and that he/she has been delivered the loan repayment or the deposit payoff plan.
Article 10
Elements for calculation of the effective interest rate, the manner of calculating and reporting effective interest rate and minimum contents of the loan repayment plan or the deposit payoff plan shall be closely regulated in the Methodology for Calculation and Reporting of Effective Interest Rate to Loans and Deposits, which makes an integral part of this Decision.
Article 11
The Decision on the Uniform Manner of Calculation and Reporting of Effective Interest Rate on Loans and Deposits (OGRM 51/13, 52/14) shall be repealed with effect from the date of application of this Decision.

Article 12
This Decision shall enter into force on the day following that of its publication in the Official Gazette of Montenegro, and it shall be applied of 1 January 2022. THE COUNCIL OF THE CENTRAL BANK OF MONTENEGRO Decision number: 0101- 9053 -5/2021 Podgorica, 28 December 2021

CHAIRMAN
G O V E R N O R,
Radoje Žugić, m.p

Methodology for the calculation and reporting of effective interest rate on loans and deposits
I. Basis for effective interest rate calculation
Basis for loans and deposits effective interest rate calculation consists of compound interest account, decursive interest calculation and discounting based on calendar number of days of the month and of the year. The manner of effective interest rate calculation is based on the net present value method. By applying the effective interest rate, discounted cash inflow equals to the discounted cash outflows referring to loans and received deposit. Effective interest rate is the interest rate, by which application the discounted series of net cash flows is equal to zero. Effective interest rate on loans which use cash collateral as security instrument is additionally adjusted with single equivalent of the impact of discounted cash inflows and outflows based on cash collateral that is used to secure loan collection. In terms of loan relation, net cash flow on loans in specific period represents a difference between all payments of the customer and all payoffs to the customer over that period. Cash flows include any cash transfers between customer and creditor, and occasionally, third party that is directly related to loan approval, or forms a
part of loan terms (e.g. payments of principle, instalment, fee for loan approval, fee for
loan servicing, etc.) or qualifies loan approval (fee for processing loan request). Similarly, in deposit relation, net cash flow during a specific period of time represent the difference between any payments to deposit recipient and any payoff to depositors, over that period.
II. Preparation of repayment/payoff plan
When establishing credit relation, creditor delivers a repayment plan to the customer, and when establishing deposit relation, the depositor delivers a deposit payoff plan to the customer, with clearly presented effective interest rate. Repayment/payoff plan must include nominal interest rate, with explanatory note stating whether the interest rate is fixed or variable. Repayment/payoff plan (hereinafter: Plan) is delivered to the customer without auxiliary columns for effective interest rate calculation. Auxiliary columns in the repayment/payoff plan for effective interest rate calculation show: net cash flow, discounted net cash flow, discounted loan disbursements and discounted cash collateral flows. Creditor, i.e. depository encloses the repayment/payoff plan with auxiliary columns for interest rate calculation to its loan, i.e. deposit documentation. Header of the repayment/payoff plan (for loan or deposit agreement or for customer information) must include name and address of the creditor, i.e. depository, and contact information. Repayment/payoff plan should also include preparation date and a note that the effective interest rate is valid as at repayment/payment plan preparation date.

Repayment/payoff plan, handed to the customer when signing a loan, i.e. deposit agreement has to include creditor’s, i.e. depository’s seal, as well as the signature of responsible person. Effective interest rate calculation is based on the assumption that the loan agreement will remain effective during the agreed period and creditor and the customer will meet all obligations within the conditions and deadlines prescribed by the loan agreement. For example, if a loan agreement prescribes higher interest rate in case when the customer doesn’t regularly repay the loan, this fact should be disregarded, and repayment/payoff plan should be developed based on the interest rate prescribed for the regular loan repayments. For loan or deposit agreements that include clauses on variability of the interest rate as well as fees and commissions that are part of the effective interest rate calculation, the effective interest rate is calculated based on the assumption that the interest rate and other fees during the contracting period will remain fixed in relation to the initial interest rate and that they will be applied until the expiry of the loan agreement. The following assumptions are used for the calculation of effective interest rate, if applicable:

If loan agreement allows for the freedom to choose the amount and deadlines for
the withdrawal of funds, it is considered that total amount of loan is withdrawn immediately and in full amount;
With regard to loans where a customer, based on loan agreement, generally has a
freedom to withdraw funds but within agreed limits that refer to the withdrawal amounts and periods, the effective interest rate is calculated using the assumption that the funds will be withdrawn at the earliest date anticipated by the loan agreement in the amount of the agreed limit;
In case of overdraft, it is considered that total amount of loan is fully withdrawn and
for the entire life of the loan agreement. If the validity period of overdraft is unknown, the effective interest rate is calculated based on the assumption that the validity period is three months;
In case of the loan agreement with no maturity (open-end credit, revolving credit),
except overdraft loan, the following assumptions are used for the effective interest rate calculation:

Loan is granted for a period of one year starting from the date of the initial
withdrawal of funds based on that agreement, and the customer pays the remaining principal, interest and other expenses, if any, by repaying the last instalment;
A customer repays principal in identical monthly amounts, starting from the expiry
of one month following the date of the initial loan withdrawal. In cases where the principal must be repaid fully through one-off payment within each repayment period, it is considered that consecutive withdrawal of funds based on the loan agreement and repayment of entire amount of principal by customer are executed during one-year period. Interest and other expenses are paid in accordance with such fund withdrawals based on loan agreement and principal repayments in the manner set forth in the loan agreement. Loan agreement with no maturity, within the meaning of this methodology, is a loan agreement signed for unspecified period, which includes loans that must be repaid

fully or after certain period, and they are available for re-disbursement after repayment;
5) in case of loan agreements where overdraft agreement or loan agreement with no
maturity has not been signed, the following assumptions are used:
 If the date or the amount of principal repayment by the customer cannot be determined with certainty, it is assumed that the repayment will be made at the earliest date and in the lowest amount foreseen by the loan agreement,  If the date of conclusion of loan agreement is unknown, it is assumed that the date of initial withdrawal of funds based on loan agreement is the date resulting in the shortest range between such date and the date of the first payment to be made by the customer,  In case where the date or the amount of repayment to be made by the customer cannot be determined based on the loan agreement with certainty or using other assumptions from this methodology, it is assumed that the repayment is made in accordance with the dates and conditions required by the creditor, and if they are unknown, it is assumed that:
a) Fees are paid together with the principal repayment, b) Non-interest bearing expenses shown as one-off amount are paid as of the day of the loan agreement conclusion, c) Non-interest bearing expenses shown as separate payments are paid in regular instalments starting from the date of the first principal repayment, and if amounts of such payments are unknown, it is assumed that the amounts of payments are equal, d) The remaining portion of principal, interest and other expenses, if any, are settled by the last customer payment;
6) If ceiling of the loan is not agreed, it is assumed that such limit amounts to
1.500 euro;
7) If different interest rates are envisaged by the loan agreement or fees for
different periods of withdrawal of funds are agreed by the loan agreement, it is assumed that funds will be withdrawn and used at the highest interest rate and fee envisaged by the agreement;
8) For loan agreement for which fixed interest rate is agreed compared to the
initial period, and a new interest rate is agreed after the expiry of that period, which is further periodically adjusted with some agreed indicator, it is assumed that end-period interest rate for which fixed rate is valid is the same as in the moment of the effective interest rate calculation based on the value of the agreed indicator in that moment. Regarding trial calculations of effective interest rate on loans and for purpose of informing the customer, it is assumed that hypothetical loan from the example is released on the first day of the month, and that the capitalised interest is calculated for at least one month. Foreign currency loans and deposits are shown in respective currency. Loans and deposits in EUR, with foreign currency clause, are shown in EUR, according to the foreign exchange rate valid on the repayment/payoff plan preparation date. Foreign exchange rate of the previous translation must be stated in the repayment/payoff plan. If more than one reference exchange rate is used (e.g. buying exchange rate when

granting the loan, and selling exchange rate when repaying the loan), each of the exchange rates used, should be stated in the repayment/payoff plan, as well as the explanation of the use of specific exchange rates. Exceptionally, if the same reference exchange rate is used for release of the loan and loan repayment, and for the acceptance and payoff of deposits (e.g. ECB reference exchange rate taken over by the CBCG and posted on its web site), loans and deposits with foreign currency clause can be shown in foreign currency (instead of EUR), as at the day of repayment/payoff plan development. Foreign currency loans and deposits with fees and commissions that are determined and paid in EUR, when calculating the effective interest rate, need to be converted in foreign currency based on the mean exchange rate valid on the repayment plan date.
III. Calculation of effective interest rate on loans by the repayment plan
Effective interest rate on loans is calculated by using the loan repayment plan (loan repayment plan template is provided in the annex of this methodology) and by using the tentative method and linear interpolation, as well as calculator or appropriate computer program (e.g. Excel). Procedure is identical as the procedure for general determination of internal yield rate. Loan repayment plan (hereinafter: loan repayment) includes the following columns:

Period – marks the serial number of the period of specific cash flow. zero period is
the period of the first cash flow or the agreed date of loan release/disposal, depending what period comes first. Last period is the period of the final cash flow.
Date – marks the exact date of the cash flow, because the effective interest rate is
calculated according to the number of calendar days of the month and 365/366 days of the year. For the loans withdrawn in instalments, customer needs to state planned dates of instalments withdrawals, and their amounts.
Loan – this column should include loan amount, or part of the loan (instalment) to be
paid, on the date of the certain payment, or when the customer expects to withdraw individual instalment or entire loan. Repayment plan of loans withdrawn in instalments need to state the total loan amount.
Other payoffs – this column should include other payoffs executed by the creditor
and based on internal procedures, except payoff of cash collateral and interest on placed cash collateral.
Annuity – can be equal or variable. Repayment plan must specify annuity
components.
Instalment – this column is for the amount of principal repayment, paid from annuity
in each period.
Interest – this column includes the amount of interest on the remaining debt, and
capitalised interest. Repayment plan header must specify the nominal interest rate, explaining whether the interest rate is fixed or variable. If the interest rate is variable, this fact is disregarded in calculation and presentation of effective interest rate. In this case, calculation of effective interest rate is done by applying the nominal interest rate which is valid on the calculation date.
Other expenses – this column is for all other expenses incurred by the customer,
and directly related to the loan, including:

for consumer loans:

expenses for opening and maintaining a separate account agreed for granting a
loan agreement, which clearly shows payment transactions, as well as other expenses referring to payment transactions, except where account opening is optional.
expenses related to loan security instruments (expenses for real estate value
assessment, expenses for booking in the pledge on real estates and movable assets serving as loan security instrument) and other expenses referring to loan security instruments, where obtaining those instruments is a precondition for granting the loan;
insurance premium, and
Other similar fees and commissions directly related to the loan.

for other loans:

fee for processing the loan request,
fees for granting the loan (payment operations expenses),
fee for loan maintenance, loan servicing, and statements,
fee for undrawn loan amount for framework and other loans,
Other similar fees and commissions paid to the creditor by the customer.
Calculation of effective interest rate excludes:

for consumer loans:

Fees for public-legal authentication of documents;
Default interest or any other expenses which may rise from client’s acting
contrary to terms from the loan agreement;
Post, telephone and telegraph expenses, and
Other similar fees and commissions.

for other loans:

Loan security instruments expenses (expenses for real estates value
assessment, expenses for booking in the pledge on real estates and movable assets serving as loan security instrument, fees for collecting evidences on real estates’ ownership serving as loan security instruments, expenses for guarantees etc.);
Fees for public-legal documents’ authentication;
Fees for obtaining different certificates, confirmations, licenses and decisions of
competent bodies and authorities;
Default interest or any other expenses which may rise from client’s acting
contrary to terms from the loan agreement;
Postage, wire and fax expenses, and
Other similar fees and commissions.
In terms of consumer loans, if in the moment of publishing of services or informing the customer, pursuant to Article 6 of this Decision, the creditor is not familiar with the amount of insurance policy expenses or about other loan security instruments expenses,

which represent mandatory condition when granting the consumer loan, the creditor properly informs the customer that this loan collateral represents a condition for granting the loan and that expenses referring to that collateral are not included in presented amount of the effective interest rate. In the moment of publishing the services or informing the customer, pursuant to Article 6 of this Decision, the creditor properly informs the customer about the type of expenses referring to the loan, but are not included in the calculation of the effective interest rate, as well as about the amounts of these expenses, if the customer is familiar with them.
9. Loan balance – this column states loan balance in a certain period. It is equal to the
loan amount decreased by paid-off principal (cumulated instalments).
10. Cash collateral flows – this column states any cash flows related to cash collateral –
payments and payoff of cash collateral, contingent expenses related to cash collateral and contingent interest on cash collateral, positive when the cash flow is directed from the customer to depositor (payment), and negative when the cash flow is directed from the depositor to the customer (payoff or interest).
11. Description – states summary of cash flow during a certain period.
12. Net cash flow – represents the sum of instalments (column 7), interest (column 8)
and other expenses (column 9) - positive cash flow, decreased by loan amount (column
4) and other payoff (column 5) - negative cash flow during a certain period. All amounts
in columns 4 – 10 are reported as positive. Net cash flow can be positive or negative, positive marking net asset inflow to the creditor (payments) and negative marking net asset (payoff).
13. Discounted net cash flow – this column includes amounts that are obtained by
discounting net cash flows from column 12 with annual interest rate of loan expense (percentage), using the following formula :
t d k
PGS NNT








1 .
NNTk means net cash flow in certain period, while PGS in discounted factor means annual rate of loan expenses: d/t in exponent is sum of the following components:

share of number of days starting from zero period to December 31 of the same
year, in number of days in year of zero period,
number of years between the year of cash flow that is discounted and year of
zero period, not counting the two mentioned years,
share of number of days beginning with date of the period of cash flow that is
discounted to December 31 of the previous year, in the number of days in a year of the cash flow that is discounted. Mathematical formula for calculation of d/t may be expressed as follows:

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( )
( ) ( ( ) 1).12.31.
( ) (0) 1
(0)
(0).12.31. (0) t k dat k yyyy k yyyy k yyyy t yyyy dat t d t(0)= 1+yyyy(0).12.31.-yyyy(0).01.01. t(k)= 1+yyyy(k).12.31.-yyyy(k).01.01. In this formula, dat(0) is date of zero period, while dat(k) is the date of the period in which there is the cash flow that is discounted. Excel formulas can be used for calculation (e.g. with the dates in the format given in the formula above). D/t represents, in fact, number of years (not necessary the whole number) between the dates of zero period and date in which is shown cash flow, which is discounted, i.e. length of that period expressed in years. Since PGS represents the rate which is yet to be calculated, a process for its calculation is mentioned. Repayment plan ends with row Total, which is established after the last cash flow in the last period. In that row, in the column Discounted net cash flow all discounted net cash flows from individual periods are added. PGS represents an approximate solution with two decimals of the following equation:
1 
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 t d k k
PGS NNT .
A method of attempt or method of linear interpolation may be used for its calculation, by using calculator of appropriate computer program. Obtained annual rate of loan expenses is not shown in the repayment plan but is used for the calculation of the effective interest rate using the following formula:
UDIK UDTSP
UDIK EKS PGS

 
The meaning of symbols UDIK and UDTSP is explained in the points 14 and 15.
14. Discounted loan payments – in this column there are discounted values of loan
payments referred to in the column 4. When discounting, previously calculated PGS is used and it is discounted according to the zero period by using the following formula:
t d k k
PGS DIK IK







 
( ) 1 ,

whereby, DIKk means discounted loan payment in a certain period, IKk means loan payment is a certain period, while other symbols have the meaning referred to as in the point 13. Sum of discounted loan payments:
 k
UDIK DIKk
, which is used in calculation of the effective interest rate described in point 13, is on the cross section of the row Total and column Discounted loan payments.
15. Discounted flows of cash collateral – this column includes discounted values of cash
collateral flows referred to in the column 10. Previously calculated PGS is used in discounting and it is discounted according to the zero period using the following formula:
t d k k
PGS DTSP TSP







 
( ) 1 . whereby, DTSPk stands for discounted flow of cash collateral in a certain period, TSPk cash collateral flow in a certain period, while other symbols have the meaning referred to as in point 13. Sum of discounted cash collateral flow:
 k
UDTSP DTSPk
, which is used in calculation of the effective interest rate described in point 13, is on the cross section of the row Total and column Discounted cash collateral flows. Repayment plan that is distributed to the customer should not encompass supporting columns 12 to 15 and annual interest rate of loan expenses that are used for effective interest rate calculation. Repayment plan that is attached to the loan documentation includes these supporting columns, as well as PGS. There is no need for filling blank columns. Obtained effective interest rate shall be shown in repayment plan with two decimals, rounding up to the second decimal and it should not be less noticed than other data. As a rule, the effective interest rate at least equals to the agreed nominal interest rate. Exceptionally, if the effective interest rate, calculated in line with the provisions of this Decision, is lower than the agreed interest rate or cannot be calculated (e.g. due to relatively high cash collateral amount, serving as loan collateral in relation to the amount of that loan) the creditor is obliged to inform the customer and provide explanation on the reasons why the effective interest rate is lower, i.e. why it does not have economically logical explanation (e.g. when it has negative value or when it cannot be calculated). Repayment plan shall include currency of the reported cash amounts. Repayment plan is not needed for loans on current account (so called “allowed overdraft”) since these loans are repaid from the inflows that arrive first on the

customer’s account. For the purpose of calculating and reporting effective interest rate that refers to these loans, only nominal interest rate is included in calculation. If creditor is charging different interest rates for different amounts of allowed overdrafts, it is necessary to calculate and report whole scale of imputed effective interest rates, with precise guidance of marginal amount of overdrafts up to which certain effective interest rate is applied. Creditor is also obliged to inform the customer on other possible fees, commissions and similar cash flows related to this type of loan. These rules also apply to all other framework loans such as revolving framework loan on credit cards, etc. If the dates of the withdrawal of funds cannot be determined in advance for agreed framework credit lines, any withdrawal of funds is considered a special loan, for which repayment plan with reported effective interest rate is developed. If certain loan is granted in several instalments, fee for signing the agreement, maintaining the account and other fixed fees or those fees that are tied to the total amount of loan, should be divided by individual instalments proportionally by their amount, and than imputed proportional portions of these fees and commissions should be included in effective interest rate calculation on actual maturity date. There is no need to develop repayment plan, or to report effective interest rate for acceptance loans, factoring and financial leasing, for loans on credit cards that are distributed and signed on selling places as well as for mandatory operations.
IV. Calculation of effective interest rate on deposits using repayment plan
Effective interest rate on deposits is calculated using deposit payoff plan (the form of the deposit payoff plan is attached to the methodology), applying the method of attempt and linear interpolation using calculator or other appropriate computer software. The process is identical to determination of general internal rate of return. The deposit payoff plan (hereinafter: payoff plan) contains the following columns:

Period – means ordinal number of the period in which certain cash flow is
recorded. The zero period is the period of the first cash flow. The last period is the one in which the last cash flow occurs.
Date – means the correct date of cash flow, since the effective interest rate is
calculated according to the calendar number of days in month and 365/366 days in year. For deposits that are paid in/out in instalments (e.g. residential savings, pension savings, rent savings and the like) it would necessary to request from the client to state the projected dates when the payment in/out should occur in instalments, and the amount of expected payments (if these were temporary payments).
Deposit amount – means the deposit amount i.e. a portion of deposit (instalment
amount) that needs to be paid in, on the date when it is certain that the payment will be made, i.e. when the client is expected to pay in the deposit. As regards the deposits paid in instalments, the payoff plan should contain total amount of deposit and indication that these are expected payments.
Payments on behalf of customer – this column includes approvals on behalf of
customer that are assigned to deposit (e.g. amount of assigned interest rate, state incentive funds, bonuses assigned during the contractual period and the like).
Other payments – this column includes other payments that the depositor (owner
of the funds) executes upon depository’s request, based on depository’s internal regulation (e.g. account maintenance fee).
Deposit amount for payoff – this column includes amount of deposit that is paid out
as at the date when it is certain that the payoff will be made (e.g. after the expiry of time deposit agreement).
Interest rate amount – this column includes interest rate amount to be paid in
contractual periods.
Payments on deposit – this column includes clients’ indebtedness that is
suspended against the deposit (e.g. suspension of the account maintenance fee).
Other payoffs – this column includes other payoffs that the depository is paying to
the depositor per each deposit (e.g. payment of the deposit premium conditioned by fulfilment of certain conditions by depositor, or other similar payoffs). If the depository pays particular deposit premium (bonus), it is obligatory to state the percentage or the flat rate of the premium in the payment plan.
Deposit balance – deposit amount in particular period is written in this column. It is
equal to the amount of paid deposit increased by assigned interest rate, i.e. other imputes and then decreased by fees that the depository suspends from that account. For accounting effective interest rate, it is considered that total amount of deposit with assigned interest rate is paid after the expiry of the time deposit agreement.
Description – includes summary of cash flow in particular period.
Net cash flow – is a sum of paid deposits (column 4) and other payments (column

(positive cash flow), decreased by sum of the deposits for payoff (column 7),
interest rate amount (column 8) and other payoffs (column 10) (negative cash flow) during a particular period. For the purpose of this Methodology, payments on the behalf of the customer (column 5) and payoffs by deposit (column 9) do not enter into the calculation of the net cash flow. All amounts in columns 4 through 11 are reported by positive sign. Net cash flow may be positive or negative sign, where positive sign marks net inflow of funds in the depository (payments) and negative sign marks net outflow of funds from the depository (payoffs). For the needs of calculation of effective interest rate, it is considered that the depositor after the expiration date of time deposit shall withdraw available deposit with assigned interest and other payments (such as premium).

Discounted net cash flow – this column includes amounts generated by discounting
net cash flows from column 12 with required effective interest rate using the following formula:
t d k
PGS NNT








1 .

NNTk means net cash flow in particular period, while PGS in discounted factor means effective interest rate; d/t in the exponent means the sum of the following components:
 part of number of days starting from the zero period to 31 December of the same year in number of days in year of the zero period,  the number of years between the year that is discounted and the year of the zero period without counting the two mentioned years, and  Part of number of days from with date of the period of cash flow that is discounted to 31 December of the previous year, in number of days of cash flow that is discounted. Mathematical formula for calculation of d/t may be expressed as follows:
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(0).12.31. (0) t k dat k yyyy k yyyy k yyyy t yyyy dat t d t(0)= 1+yyyy(0).12.31.-yyyy(0).01.01. t(k)= 1+yyyy(k).12.31.-yyyy(k).01.01. Dat(0) is the date of the zero period and dat(k) is the date of the period of the cash flow that is discounted. Formulas in Excel files may be used for calculation (with the dates in the format given above). D/t represents number of years (not necessarily the whole) between the dates of the zero period and the date of cash flow that is discounted is given, i.e. length of that period is expressed in years. Since EKS is effective interest rate that needs to be calculated, the text below explains the process of its calculation. The payoff plan ends with category Total, which is determined after the last cash flow in the last period. All discounted net cash flow from particular periods are summed in that row of the column Discounted net cash flow. Effective interest rate is approximate solution of the following equation, rounded up to the second decimal. 1                   t d k k EKS NNT . Method of attempt and linear interpolation may be used for the calculation of this equation, using calculator or appropriate computer programme. The resulting effective interest rate is reported in Repayment plan, with two decimals and rounding up to the second decimal and it may not be less visible than other data. Payoff plan that is given to the client should not contain supporting columns 12 and 13 that are used for calculation of the effective interest rate. The payoff plan that is attached to deposit documentation includes these columns. Blank columns need not be filled in. Repayment plan includes the currency in which the amounts are reported.

Repayment plan is not needed for transaction accounts, and savings and demand deposit; it is enough to note in the deposit agreement that the effective interest rate is equal to nominal interest rate. In this case, only nominal interest rate is included for the purpose of calculating and reporting effective interest rate. If a depository is charging different nominal interest rates for different balances on these accounts, it is necessary to calculate and report the whole scale of assigned effective interest rates, with precise guidance of marginal amount on these accounts up to which individual interest rate is applied. The depository is obliged to inform the client on possible other fees, bonuses and similar cash flows regarding these accounts.

Creditor: LOAN REPAYMENT PLAN
Address:
Phone/Fax
Currency Annuity Annual interest ratePGS (%) Effective interest rate (%):
Loan amount Nominal interest rate (%) Fixed/
Variable
Period
Net cash flow
Date Loan Other payoffs
Annuity Instalment Interest Other expense s
Loan balance
Cash collateral flows
Descrip tion
Net cash flow
Discounted net cash flow
Discounted loan payments
Discounted flows of cash collateral

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
…
…
…
…
…
Total:
Note: Effective interest rate is valid as at the date of the repayment plan’s preparation. Date:______________ Signature and stamp

Credit institution:
DEPOSIT REPAYMENT PLAN
Address
Phone/Fax:
Currency: Effective interest rate (%):
Deposit amount: Nominal interest rate (%) Fixed/ Variable Premium (%) Period Date Deposit amount Payments on behalf of customer Other payments Deposit amount for payoff Interest rate amount Payment s on deposit Other payoffs Deposit balance Description Net cash flow Discounted net cash flow

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.
…
…
…
…
Total:
Note: Effective interest rate is valid as at the date of the payoff plan’s preparation. Date:______________ Signature and stamp

Decision on the Calculation and Reporting of the Effective Interest Rate on Loans and Deposits

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