Collateral Agreement 

Definition

An arrangement under which the collateral giver transfers rights on a collateral object to a collateral taker. The collateral agreement uses these rights on collateral for collateralizing receivables of the collateral giver.

 

Use

The collateral agreements represent the terms and conditions on the basis of which receivables are collateralized. Use collateral agreements to perform the following:

 

Maintain Master Data

Maintain master data for collateral agreements. The master data can be classified as general and specific data. The general data is common for all collateral agreements and includes details such as value, validity, country of jurisdiction and termination details.

The specific data represents the additional scope for the specific business of the collateral agreement category. For example, a real estate lien requires interest and enforcement details while a guarantee presents details describing the nature of the guarantee (counter guarantee, fixed liability, indemnity bond and directly enforceable agreement).

 

Assign Business Partners and Documents

Assign business partners and document types attached to the collateral agreements in relevant partner functions and document types respectively.

 

Create Charges

Assign charges to the collateral agreements to enable them to use collateral for collateralizing loans.

 

Determine Scope for Collateralization

Specify the details of collateral agreement portions such as value, validity, business partners for respective portions and also any restrictions on portions. If the collateral agreement has a wide declaration of purpose, you can use the rules for automatic assignment to receivables.

Determine the scope for collateralization by assigning the receivables to be collateralized. You can also specify details of collateral agreement portions that will be used in the collateralization process.

 

Maintain Relationships

Use collateral agreement relationships to enhance the collateral agreement value. You can use different types of relationships such as back-up, backed-up, pool and transitional collateral agreements.

 

Use Special Arrangements

Use legal documents or special arrangements (such as trust order or notary declaration) as arrangements by the financing banks to approve loans. The standard system currently supports special arrangement scenarios only for real estate liens.

 

Implement Process Configuration Framework

Implement the process configuration framework to determine the business activities possible on collateral agreements. You can also control the quality of data maintained in collateral agreements. You can specify five additional organizational units for the collateral agreement and view a list of system and user statuses that the collateral agreement has assumed in its lifecycle.

 

Perform Calculations

Initiate calculations for collateralizing receivables. The system also performs a range of intermediary calculations for collateral agreements to consider the various attributes (such as prior charges, relationships and special arrangements) that may influence the calculated values.

Perform calculations for determining the extent of collateralization possible for receivables assigned to collateral agreements.

 

Maintain Notes

Create additional descriptions for collateral agreements by using the notes feature.

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Structure

A collateral agreement has a three-layered hierarchy with the collateral agreement category at the highest level followed by the collateral agreement type. The individual collateral agreements are at the lowest level of the hierarchy. The collateral agreement types must be defined for a collateral agreement category. Similarly, a collateral agreement must be defined for a collateral agreement type.

 

Graphic 1.1: Representation of collateral agreement details

 

The graphic 1.1 shows the different details that can be maintained in a collateral agreement. In addition, the graphic also shows the different interfaces that a collateral agreement uses for maintaining some of these details.

The master data for collateral agreements can be maintained in several sub-screens (tab pages). The structure and the possible screens are determined by the Customizing settings that you define using the Business Data Toolset (BDT) and the configuration settings in the Implementation Guide (IMG). You must therefore note that the screens and sub-screens may not be common across all the collateral agreement types or categories.

 

Integration

●     Collateral agreements can be assigned to collateral objects for creating a charge on the collateral. To enable this assignment, you must implement the asset interface (Business Add-Ins CMS_AST_DIALOG and CMS_AST_NONDIALOG). This interface must be implemented for using add-on object systems provided by Collateral Management or any other external object systems. Additionally, you must define the following Customizing settings:

○     Names of object systems in the IMG by choosing Collateral Management ® Assets ® Define Object Systems.

○     Asset types in the IMG by choosing Collateral Management ® Assets ® Define Asset Types. Additionally, you must assign a relevant asset type to each collateral object type. This is required because the system internally uses an asset to represent the collateral details of collateral objects.

○     Asset type-collateral agreement type assignments by choosing Collateral Management ® Collateral Agreement ®Assign Asset Types to Collateral Agreement Types. By this assignment, you can ensure that charges on asset types relevant for business of a collateral agreement get assigned.

 

●     Receivables can be collateralized by assigning them to collateral agreements. The standard system provides an integration framework to connect to SAP Loans Management (CML).

For more information, see

Integration with Loan Management

 

●     Relationships can be defined between collateral agreements for enhancing the value available for collateralization. No specific framework is required to define these assignments.

 

●     Interfaces provided by the standard system can be used for implementing external business partner and document systems. Default implementations have been provided with SAP Financial Services Business Partner (FSBP) and SAP Document Management System (DMS).

 

●     The collateral agreement data is included in the data extraction process of Collateral Management. The collateral agreements themselves are represented as financial transactions in the SAP Source Data Layer (SDL). The charges are represented as positions. These details can be used for analyzing the quality of collateral as required by the Basel II framework standards.