Setting up an in-house bank relation

Learn how to set up in-house bank relations between companies, enabling streamlined management of internal borrowing and lending. This article covers the entire process, including creating a relation, assigning debt balances, and configuring interest and accounting settings.

Tip: Before starting, ensure you have the necessary permissions to create relations. Contact Customer Experience if access is restricted.

1. Log in to your Embat account using the following link.
2. Enter your credentials: email and password.
3. In the main menu on the left sidebar, click In-house banking module 
   
4. Initiate a new relation: click Add relation to begin setting up a connection between two subsidiaries.
   
5. Configure relation settings
   • Select companies: Choose two companies for the relation. Typically, Company A is the in-house bank (the lending entity), and Company B is the subsidiary (the borrowing entity). However, you can select any two companies.
   • Currency selection: Choose the currency for this relation from the combined set available in both companies’ financial products. You can create one relation between selected companies per currency.
   • Start date: Set the relation start date in Embat. The accrued interest will be calculated from this date onward.
   • Define ledger accounts: Assign specific ledger accounts for recording changes in intercompany debt that are not related to interest capitalisation.
   • Initial balances: Set the opening balance as of the start date in Embat. The counterbalance for the other company will automatically adjust. If the relation is new or the current debt balance is 0, you may set balances to 0.
   • Product alias: Optionally, customise the product alias for easier identification. If no alias is set, it will default to "trade name of subsidiary A - trade name of subsidiary B."
     
     
     
     
6. Click Continue to proceed to interest settings for the relation.
7. Configure Interest Settings
   • Choose if the relation bears interest: By default the value is set to yes. Toggle off if the relation does not bear interest on outstanding balances.
   • Define ledger accounts for interest: Assign ledger accounts to record interest for both borrowing and earning. This setup ensures each interest capitalisation is accurately reflected in accounting records.
   • Interest type: Select between fixed or variable interest:
     1. Fixed Interest: Set a fixed rate for consistent calculations.
     2. Variable Interest: Choose a variable rate based on a market index (EURIBOR or €STR). Add a spread percentage, if applicable, and set the reset frequency (weekly, monthly, quarterly, or annually).
        
        
        
        
8. Review and Save
   • Confirm all details, then click Create relation to finalise. The relation will now appear in the list view in the Balance and Interest tabs.
   • Simultaneously a bank called In-house bank has been created into Banking connections into both companies (unless it already exists) and a line of credit type of product has been created under the bank. Future in-house bank transactions will be recorded under these products.
   • Tip: To ensure the automated accounting of intragroup transfers and capitalised interest you still need to initiate accounting for the newly created products. For more details, refer to the article “Automated accounting for intragroup transfers and capitalised interest”. 
     
     

If you have any further questions, please contact the Customer Experience team or submit a request through this link.