Liquidation 
Purpose
Use this process for initiating liquidation process for collateral objects in SAP Collateral Management. You can use the data extraction report in Collateral Management for extracting Basel II relevant liquidation data to SAP Bank Analyzer (BA). The extracted liquidation data can be used for analysis and reporting in the Basel II component of BA.
Liquidation process is not possible for securities accounts. Further, the current release supports the business scenarios only for real liquidation enforcement scenarios namely administrative receivership and foreclosure sale.
The coverage gap monitoring report provided in Collateral Management does not consider the net proceeds realized from liquidation, when determining the actual coverage gap.
Process Flow
The liquidation process comprises of the following process steps:
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1. The user determines if an enforcement title is available. This information is maintained in the collateral agreements assigned to the collateral object.
2. The user determines if the liquidation measure is being initiated by own bank or external banks that have prior or secondary ranked charges on the collateral objects. This information along with the availability of the enforcement title can be used to determine the following behavior:
○ If more than one collateral agreement is attached to a bad receivable, the collateral agreement with the lowest rank must be used for liquidation purposes. This means that an enforcement title must be available for the lowest ranking collateral agreement and that all existing prior charges will be considered for the internal calculations.
○ If a liquidation measure has been initiated by a bank with prior charge and another bank with secondary charge wants a share in the liquidation proceeds, both banks must have enforcement titles.
On the other hand, if liquidation measure has been initiated by a bank with secondary charge, then the banks with prior charges will automatically get a share of the liquidation proceeds and will not need an enforcement title.
○ In the scenario for a global declaration of purpose, only one enforcement title (for the single collateral agreement) will be required.
○ In the scenario for a common land charge, only one enforcement title will be required.
If a common land charge has prior charges, then the following conditions apply:
■ If the collateral agreements belong to own bank, the bank with secondary charge will need an enforcement title. The claims of the common land charge with prior charges will be included automatically.
■ If the collateral agreements belong to different banks and the liquidation has been initiated by a bank with a common land charge with secondary rank, both banks will have to show enforcement title.
3. Create a liquidation measure using an appropriate liquidation measure type. For more information, see
4. Set appropriate liquidation statuses for the collateral object. For more information, see
The following liquidation process steps cannot be performed in Collateral Management:
● Maintaining details such as entry into the handling department and cooperativeness of the borrower.
● Functions such as setting receivables as due, identification of payable arrears, initiating liquidation and control of collection process. These functions must be handled by the credit system in which the receivables are maintained.
● Disbursement of excess proceeds resulting from the liquidation process.
● Assignment of the net proceeds to an individual component (fees, interest and principal) of a receivable is not allowed.
● Partial assignment of collateral objects.