Determining Final Value Available From Collateral Agreement 

Use

This process explains how the system determines the value of collateral agreement available for collateralization. In this process, it considers the various attributes of collateral agreements such as the value-type, the collateral agreement category and the prior charges. The final value for collateral agreement therefore differs depends on the business scenario of the collateral agreement (such as a normal collateral agreement, relationships, back-up, backed-up and pools). There is no one single value that can be considered as final value available from collateral agreement.

The calculation functions for collateral agreements support the business requirements for the different collateral agreement categories such as real estate lien, guarantees, transfers, pool agreements and also the relationships with other collateral agreements.

Process Flow

The system performs the following steps in the process of deriving the collateral agreement value available for collateralization:

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       1.      Calculates the assessment value for collateral agreements using the value-type specified in the Customizing for collateral agreement types. The assessment value is internally considered as the actual value of collateral agreement.

       2.      Determines the maximum possible value (collateral right) for the collateral agreements. The system uses the collateral right to limit the value of the collateral agreements that can be used for collateralization purposes.

The collateral right is therefore a minumum of the collateral agreement assessment value and the sum of receivables assigned to the collateral agreement.

       3.      Identfies charges that have higher ranking order (prior charges) and that must be discounted from the value of the collateral agreement.

Prior charges can belong to collateral agreements of own bank or any external banks. You can specify prior charges for a collateral agreement by creating separate collateral agreement portions and by specifying higher ranking orders for them. Charges belonging to other collateral agreements and having lower ranking charges are not considered as prior charges.

       4.      Determines the value of collateral agreement that must be considered for calculation of collateral value. This value will depend on the assessment value, collateral right value, lending limits of collateral object and prior charges on the collateral agreement.

Calculates the value of charges with a higher ranking order (prior charges) that must be discounted from the value of the collateral agreements.

Determines the possible loan-to-value ratios for the collateral agreements that can be used to analyze the collateralization by the collateral agreements.

Calculates the value of the collateral agreements that is available for collateralizing the receivables (collateral value) assigned to the collateral agreements. The system uses the assessment value, collateral right and prior charges in determining the collateral value for the collateral agreements.

Determines the maximum possible value (collateral right) for the collateral agreements. The system uses the collateral right to limit the value of the collateral agreements that can be used for collateralization purposes.

Calculates the value of charges with a higher ranking order (prior charges) that must be discounted from the value of the collateral agreements.

Determines the possible loan-to-value ratios for the collateral agreements that can be used to analyze the collateralization by the collateral agreements.

Calculates the value of the collateral agreements that is available for collateralizing the receivables (collateral value) assigned to the collateral agreements. The system uses the assessment value, collateral right and prior charges in determining the collateral value for the collateral agreements.

Determines the maximum possible value (collateral right) for the collateral agreements. The system uses the collateral right to limit the value of the collateral agreements that can be used for collateralization purposes.

Calculates the value of charges with a higher ranking order (prior charges) that must be discounted from the value of the collateral agreements.

Determines the possible loan-to-value ratios for the collateral agreements that can be used to analyze the collateralization by the collateral agreements.

Calculates the value of the collateral agreements that is available for collateralizing the receivables (collateral value) assigned to the collateral agreements. The system uses the assessment value, collateral right and prior charges in determining the collateral value for the collateral agreements.