Coverage Gap Value 

Use

This function calculates the collateral shortfall (coverage gap) when the available collateral value is not sufficient to collateralize all the receivables assigned to the collateral agreement. The system calculates the collateral shortfall separately for each receivable both according to the maximum risk and the current risk of the collateralized receivables.

 

The standard system provides the business partner overview report to determine the status of collaterals for a business partner. You can also use the function for approved coverage gap to analyze the coverage gap for business partners and collateral agreements.

 

Activities

The system calculates the coverage gap using the following formula:

Collateral deficit = receivable amount (required for collateralization) – sum of collateral value distributed to receivables

 

Example

The following example illustrates the calculation of coverage gap:

Receivable current loan drawdown = 200 Distributed collateral value (agreement A)  = 100 Distributed collateral value (agreement B) = 50 Coverage gap  = 200 – (100 + 50) = 50