Lending Limit 

Use

This function determines the value of the assets (collateral objects) that a credit institute can lend based on the basis of the legal and statutory regulations in a country. The system calculates the lending limit by applying lending rates on the lending value of the collateral objects. The system uses the lending limit in the calculation for the lending ranges and the collateral value.

 

Prerequisites

You must enter the lending rates for the collateral objects in the Implementation Guide (IMG) Customizing for the relevant collateral object types by choosing Collateral Management ® Object Management ® Collateral Objects. Alternatively, you can enter the lending rates when maintaining the master data for the individual collateral objects.

 

Features

Some characteristic features of lending limits include:

 

       1.      Lending limit always correspond to a lending rate that is entered for a collateral object (or the collateral object type).

       2.      The system considers the highest lending limit for performing the further calculation functions.

       3.      The system determines the lending limits according to the current risk and the maximum risk.

       4.      The system distributes the lending limit to the various lending ranges entered for the collateral objects.

 

Activities

The system calculates the lending limit using the following equation:

Lending limit = Lending value*Lending rate

...

 

Example

The following example illustrates the calculation of lending limits:

Collateral object lending value = 540          1.      Lending rate 1= 54% Lending limit 1 = 540*54/100 = 291.6          2.      Lending rate 2= 70% Lending limit 2 = 540*70/100 = 378          3.      Lending rate 3= 80% Lending limit 3 = 540*80/100 = 432          4.      Lending rate 4 = 100% Lending limit 4 = 540*100/100 = 540