Collateral 

Use

In the Default Risk and Limit System, certain information about collateral is required to enable the system to calculate attributable amounts correctly, and record secondary risk appropriately. Only collateral data that is relevant for these purposes is entered in the SAP system. Seen from a general business perspective, collateral has far more complex data.

The Default Risk and Limit System distinguishes between the following levels of collateral:

·        Global collateral (not used in TRM Credit Risk Analyzer)

Global collateral can secure multiple financial transactions, which are defined by assigning the relevant characteristic values. Global collateral reduces the consumption of the limit for the relevant limit characteristics. This means it affects the utilizations and not the individual attributable amounts.

·        Single-transaction-related collateral

You assign single-transaction-related collateral to a particular financial transaction. You can assign more than one collateral item to a single transaction. When appropriate, this reduces the attributable amounts.

·        Collateral agreements

A collateral agreement is a contract agreeing the provision of collateral for trading transactions between two business partners. Collateral agreements reduce risk at the level of the attributable amounts.

Prerequisites

You need authorization object J_B_KLTCOD in order to process collateral (regardless of the level of the collateral). This is contained in authorization profiles F_T_FTLM_ALL and J_B_ISB_ALL.

Integration

General administration of collateral should be done by an external data processing system. To ensure consistent datasets, we recommend that you set up an interface between the SAP Limit System and your collateral management system. You can link the systems by using the RFC-enabled module KLSI01_SI_SAVE_RFC.

You are also able to import collateral using external data transfer (EDT) and transfer category 44. You do this by choosing the following path from the SAP Easy Access screen: Accounting ® Bank Applications ® SEM Banking ® Data Pool ® Tools ® External Data Transfer (EDT). For more information about this, see the Implementation Guide under SAP Banking ® SEM Banking ® Data Pool ® Tools ® External Data Transfer ® General Information ® Transfer Categories ® Transfer Category 044: Collateral Provisions.

Features

The system can calculate attributable amounts (secondary attributable amounts) for collateral. When collateral is taken into account, the system displays a net attributable amount for the primary transaction, and not a gross attributable amount.

The company Meier’s Mill has taken a loan of EUR 100,000. There are 2 single-transaction-related collateral items. The Deutsche Bank provides a guarantee of EUR 80,000. Mr. Meier provides a mortgage (tangible collateral) of EUR 40,000.

Business Partner	Meier’s Mill	Deutsche Bank	Mr. Meier
Product	Loan	Guarantee	Land charge
Nominal amount	100,000	80,000	40,000
Priority		1	1
Counterparty exposure (gross) per business partner	100,000	80,000	0 (because of tangible collateral)
Adjustment rate		2/3	1/3
Counterparty exposure (net, secondary)		66,666	0
Counterparty exposure (net, primary)	0