Collateral Backed Collateral Agreements 

Definition

Collateral agreements whose collateral value is enhanced using the collateral value (or parts the collateral value) of one or more additional collateral agreements.

The standard system refers to the receiver collateral agreements as backed-up collateral agreements and the donor collateral agreements as back-up collateral agreements.

 

Use

Some features of backed-up and back-up collateral agreements are:

 

·        The standard system provides the relationship types Is a back-up of and Has back-up to support the relationships between back-up and backed-up collateral agreements, respectively.

The same portion of a collateral agreement cannot simultaneously assume the relationships for both, the back-up and backed-up.

·        Collateral agreements of all categories and types can be used as backed-up and back-up collateral agreements. For example, a guarantee can be backed-up by a land charge.

You can however not use a pool agreement as backed-up and back-up collateral agreements.

·        A back-up can collateralize more than one backed-up collateral agreements. You must specify the priority and rank of the relationship. The system uses these values in the calculation of collateral value.

·        A back-up collateral agreement can collateralize other receivables directly. The system uses the ranking ratio of the collateral agreement portions in the distribution of collateral value.

You must enter a higher ranking for receivable assignments than the ranking for relationship assignments. The system does not permit you to simultaneously assign relationships and receivables to the same collateral agreement portion.

·        For a specified relationship type, you can restrict the number of back-up collateral agreements that you can assign to backed-up collateral agreements. You define this cardinality for relationship types in the Implementation Guide (IMG) Customizing by choosing Collateral Management ® Collateral Agreements ® Collateral Agreement Relationships ® Define Relationship Types.

 

Structure

The master data specific to back-up and backed-up collateral agreements includes:

 

·        Relationship type

·        Identification of the collateral agreement portion used to back-up. Alternatively, the identification of the collateral agreement portion receiving the backed-up.

·        Collateral agreement type of the back-up or backed-up collateral agreements

·        Validity dates for the relationships

·        Rank and priority of the individual relationships

 

Integration

The system performs certain intermediary calculations in addition to the standard calculation functions to determine the collateral value for back-up and backed-up collateral agreements. For detailed information, see

Intermediary Calculations for Relationships