Processing Single-Transaction-Related Collateral 

Use

You assign single-transaction-related collateral to a particular financial transaction.

The system distinguishes between the following collateral value categories:

·        Percentual collateralization

·        Collateralization using a collateral amount

·        Collateralization using securities

You can assign more than one collateral provision to a financial object within a collateral value category. The collateral provisions can then be processed in accordance with the collateral priorities. In the case of collateral using securities, only one class per collateral provision is permitted.

Prerequisites

So that single-transaction-related collateral is included in the calculation of attributable amounts, you need to have entered the following settings in Customizing:

·         You need to have already created a collateral type. You do this in Customizing under SAP Banking ® SEM Banking ® Default Risk and Limit System ® Basic Settings ® Master Data ® Define Collateral Type or Financial Supply Chain Management ® Treasury and Risk Management ® Credit Risk Analyzer ® Basic Settings ® Master Data ® Define Collateral Type.

·         You need to have already created a collateral priority. You do this in Customizing under SAP Banking ®SEM Banking ® Default Risk and Limit System ® Basic Settings ® Master Data ® Define Collateral Priority or Financial Supply Chain Management ® Treasury and Risk Management ® Credit Risk Analyzer ® Basic Settings ® Master Data ® Define Collateral Priority.

·         You need to have already created a collateral valuation rule. You do this in Customizing under SAP Banking ®SEM Banking ® Default Risk and Limit System ® Basic Settings ® Definition ® Define Collateral Valuation Rule or Financial Supply Chain Management ® Treasury and Risk Management ® Credit Risk Analyzer ® Basic Settings ® Definitions ® Define Collateral Valuation Rule.

Procedure for Creating Single-Transaction-Related Collateral

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       1.      In the SAP Easy Access screen, choose Accounting ® Bank Applications ® SEM Banking ® Data Pool ® Bank Transactions ® Collateral Provision ® Create or Accounting ® Financial Supply Chain Management ® Treasury and Risk Management ® Credit Risk Analyzer ® Tools ® Collateral Provision ® Create.

The system displays the screen Create Collateral Provision: Initial Screen.

       2.      Enter an External  Collateral ID, choose the classification Single-Transaction-Related Collateral and  Continue.

Alternatively, you can choose  Copy From... to copy an existing collateral item.

The system displays the screen Create Collateral Provision: Overview.

       3.      Enter a long name and a short name for the collateral.

       4.      In the data group Collateral Classification specify the Collateral Value Type and the Collateral Type.

       5.      You make the connection to the single transaction by specifying the financial object number on the Assignment tab page.

       6.      On the Administration tab page, the Record active indicator has to be set. This ensures that the collateral provision is included in the determination of attributable amounts. This indicator is set by default. By deselecting this indicator you are then able to delete the collateral provision. Here you can also enter the collateral provider (if the type of collateral is personal) and the priority of the collateral provision.

       7.      On the tab page Items, the collateral value category you chose earlier determines which data you need to enter.

Collateral Value Category	Fields Requiring Entries
Percentual collateralization	Valid from date, percentage (economic and political)
Collateralization using a collateral amount	Valid from date, collateral amount, currency
Collateralization using securities	Valid from date, security ID number, number of units or amount

       8.      Choose  Save.

       9.      For the primary or secondary risk-reducing effect of the collateral to be taken into account in the attributable amount determination, a financial object for the single-transaction-related collateral item is required. Once you have saved the collateral, if you then choose  Financial Object in the application toolbar, you branch directly to financial object creation.

Note that in the function for maintaining financial objects for single-transaction-related collateral, the system, when selecting data, does not take into account the validity end date stored in the financial object.

Procedure for Changing Single-Transaction-Related Collateral

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       1.      In the SAP Easy Access screen, choose Accounting ® Bank Applications ® SEM Banking ® Data Pool ® Bank Transactions ® Collateral Provision ® Change or Accounting ® Financial Supply Chain Management ® Treasury and Risk Management ® Credit Risk Analyzer ® Tools ® Collateral Provision ® Change.

The system displays the screen Change Collateral Provision.

       2.      Enter the External Collateral ID and choose  Continue.

       3.      Make the changes required and choose .

       4.      You can branch directly to financial object maintenance by choosing  Financial Object. Note that in the function for maintaining financial objects for single-transaction-related collateral, the system, when selecting data, does not take into account the validity end date stored in the financial object.

Result

If a net determination procedure is used, the single-transaction-related collateral is offset against the attributable amount of the transaction. This therefore reduces the amount of limit utilized. You need to note, however, that tangible collateral does not increase the counterparty/issuer risk of the guarantor, but instead reduces the risk of the primary transaction.

In a netting group, a single-transaction-related collateral item first reduces the positive net present value of the single transaction, and then the add-on. (The reduction by the collateral affects the determination of the net/gross ratio and the total of the single transactions' add-on and, therefore, the netting add-on.)

The attributable amount of the collateral is calculated as follows:

 

Percentual collateralization	Attributable amount (collateral) = CALCBAS (transaction) x % (collateral)
Collateral amount	Attributable amount (collateral) = collateral amount In the case of risk-adjusted attributable amount determination, the collateral amount is also risk-weighted.
Collateralization using securities	Attributable amount (collateral) = [max (0, NPVS) – nominal amountS x AOFS] x (1 - DEFPROBS)

 

where:

ABS	absolute amount
CALCBAS	Calculation base
AOFc	Collateral add-on factor
DEFPROBc	Default probability of the collateral