Determining Final Value Available from Collateral Object 

Use

This process explains how the system determines collateral object value that is available for use as collateral. In this process, the system performs a series of intermediary calculations. These intermediary calculations are used for performing further collateral calculations.

The calculation functions for collateral objects support the business requirements of the different collateral object categories. In addition, Collateral Management also provides separate calculation functions in the scenario for guarantees that have no collateral assigned to them.

 

Process Flow

The system calculates the final value of collateral object using the following steps:

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       1.      Calculates the current market value by discounting the safety discount (percentage or amount) from the collateral object value.

       2.      Determines the lending value that can be used as collateral.

       3.      Determines the lending limits that the bank or the credit institute can lend according to regulatory framework. The lending limits are therefore calculated on the lending value and limit the lending value.

Collateral Management provides the possibility to calculate upto five lending limits for a collateral object. The lending limits are calculated using the corresponding lending rates specified for collateral objects.

       4.      Determines the highest lending limit as the final value that can be used as collateral. For scenarios such as guarantees that have no charges assigned to them, the highest lending limit is calculated as the sum of all receivables assigned to the collateral agreement.