Background documentationABS/MBS: Customizing

 

Under Start of the navigation path Transaction Manager Next navigation step Securities Next navigation step Master Data Next navigation step Product Types Next navigation step Condition Types End of the navigation path, first make the settings for the required product types:

  • Define Condition Types / Define Condition Groups

    • Required condition types

      • 100 Interest (quoted in percent)

      • 118 Repayment Rate

      • 260 ABS/MBS Installment Repayment

      • 263 Final Repayment

    • Define a condition group for ABS/MBS bonds and then assign the above condition types to this condition group.

  • Define Product Types

    With the standard settings, the system portrays ABS and MBS with product category 042 with which you can define numerous variants of securities repaid with installments.

    Create at least one product type for your ABS/MBS bonds.

  • In the activity Assign Repayment Types to Product Types, you assign the repayment type 2 Installment to the product types for ABS/MBS.

  • In the activity Define Security Tranche, create tranche classifications. You can define default tranche classifications (Tranche Type: Default) and other tranche classifications that only allow interest payments (Tranche Type: IO Interest Only).

    Indicator:

    • If you set the Allow Factor Increase indicator for a tranche classification, this allows the nominal value of the bond to increase for this tranche during the term of the security. If you do not set this indicator, only a continual reduction of the nominal value is possible.

    • Allow Retrospective Adjustment of Redemptions

      See also: ABS/MBS: Retrospective Changes to Factors

    • Apply Workday Adjustment After Calendar Day Shift

    • Force First Redemption on First Redemption Date

      See also: Date Determination Options for Interest Flows and Repayment Flows

  • In the activity Activate Special Conditions for ABS/MBS, you have to activate this function for product types that you want to use together with the CPR/PSA method. When you activate this function for product types, the CPR/PSA repayment conditions become available for entry of the class data (transaction FWZZ) for those product types.

    Further, the function of using interest as a condition template for repayments is activated for all calculation methods, as is the option of entering interest in the redemption schedule.

    We therefore recommend that you set the activation indicator for all of your ABS/MBS product types.

  • Under Start of the navigation path Transaction Manager Next navigation step Securities Next navigation step Position Management Next navigation step Securities Account Management End of the navigation path, you make the settings for the update types for Securities Account Management in the following Customizing activities:

    • Define Update Types and Assign Usages

      • Update type SAM1180 Amortization at Update End, assignment to usage Securities Account Management

        This update type is required for the change in redemption schedule. For the date preceding the effective date of the new redemption schedule, the system creates the business transaction End of Fixed Period on which amortization occurs. The previous redemption schedule is used for cash flow determination for the last time. This ensures that only one redemption schedule is valid within an amortization period.

      • If you want to use the function Retrospective Changes to Repayments, you need to create the following update types and assign them to the usage Securities Account Management:

        • SAM1180A: Inflow: Retrospective Change to Factor

        • SAM1180S: Outflow: Retrospective Change to Factor

        • SAM1180+: Adjusted Incoming Interest

        • SAM1180-: Adjusted Outgoing Interest

    • Specify Update Types for Securities Account Management

      • We recommend that, for the update type for installment repayments, you set the Use Calculation Date as Position Date and Generate Debit Position Flow indicators.

        You also need to set the Use Calculation Date as Position Date indicator for interest update types. See also: Date Determination Options for Interest Flows and Repayment Flows

      • Update Type SAM1180

        For amortization at update end, you need to assign classification Period End (Redemption Schedule/Termination Date) to update type SAM1180.

        In the activity Set the Effects of the Update Types on the Position Components, assign Position Change Category 1006 (indirect position change) to the update type.

      • SAM1180A: Inflow: Retrospective Change to Factor

        Calculation category: AA

        Relevant to Calculation

        +/- sign: -

        Classification: Period End (Redemption Schedule/Termination)

      • SAM1180S: Outflow: Retrospective Change to Factor

        Calculation category: SS

        Relevant to Calculation

        +/- sign: +

        Classification: Period End (Redemption Schedule/Termination)

      • SAM1180+: Adjusted Incoming Interest

        Calculation category: NOOP

        Direction: Incoming

        Classification: Period End (Redemption Schedule/Termination)

      • SAM1180-: Adjusted Outgoing Interest

        Calculation category: NOOP

        Direction: Outgoing

        Classification: Period End (Redemption Schedule/Termination)

  • In the following Customizing activities, make the transaction management settings for these product types:

    • Define Transaction Types

    • Define Flow Types

    • Assign Flow Types to Transaction Type

    • Define Update Types and Assign Usages

    • Assign Flow Types to Update Types

    • Assign General Valuation Class

You also make the Position Management settings in Customizing for Treasury and Risk Management under Start of the navigation path Transaction Manager Next navigation step General Settings Next navigation step Accounting Next navigation step Settings for Position Management End of the navigation path.

  • In the position management procedure for your ABS/MBS positions, you need to use position management category 8 Securities/Loans w/ Install. Repayt (w/o index-linked bonds). However, you can also use position management category 1 Sec./Loans/M.Mkt/List.Opts Norm.Style.(w/o index-link.bonds) (see also: SAP Note 1666075Information published on SAP site).

  • Amortization is generally performed for position changes (purchases, sales, and transfer postings) and key date valuations. In the amortization procedure for the ABS/MBS, set the Amort. for Install. Repayment and Adjustment of Translation Flows checkboxes.

    Due to changed expectations regarding future installment payments, cash flows can change. You can take such changes into account in the amortization procedure by using the following settings in the Treat.EffIntRate (SAC) field:

    • Adjust Effective Interest Rate Immediately (Standard)

    • Constant Effective Interest Rate (for reporting in accordance with IAS)

    • Retrospective (for reporting in accordance with US GAAP)

  • Make the necessary settings in the activity Define Account Determination.

Note Note

Depending on how you have made your settings in Customizing, you may need to complete other Customizing activities, such as account assignment reference determination. As a rule, you need to add any new product types to any settings that you have made dependent on the product type. Further, anywhere where you want to have alternative settings for the new product types, you also need to make these alternative settings.

End of the note.