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Component documentationReserve for Bad Debt

 

The SAP Reserve for Bad Debts (FS-RBD) component provides a professional and efficient tool for creating, posting, and managing impairments (risks provisions).

  • Single application for centrally managing impairments

  • Modeling single risk provisions while largely eliminating the need for manual interaction

    • “Expected Cash Flows” procedure (ECF procedure, parallel for multiple GAAPs)

    • “Future Analysis” procedure

    • “Past Analysis” procedure

    • “RBD-ipx” extension (impairment processing extension, for multiple GAAPs in parallel)

  • Modeling flat-rate risk provision

    • Flat-rate value adjustment procedure

    • “RBD-ipx” extension (impairment processing extension, for multiple GAAPs in parallel)

  • Daily overview of risk provision positions and their development

  • Real time transfer to Financial Accounting of all changes that are relevant for the balance sheet

  • Automatic preparation of data that is relevant for internal and external reporting (for example, regulatory reporting).

Implementation Considerations

SAP Reserve for Bad Debts is an integral part of the SAP for Banking industry solution and is included in all installations of software component EA-FINSERV. Even in the standard system, SAP Reserve for Bad Debts can be integrated with SAP components that are relevant for risk provision and a predefined, individually customizable rule set. Non-SAP systems can be connected using standard interfaces. Implementation, therefore, mainly entails configuring the Customizing settings and connecting non-SAP systems.

Note Note

This component is priced separately. If you want to use SAP Reserve for Bad Debts (FS-RBD) in your company, contact your account manager.

End of the note.

Caution Caution

To use the “RBD-ipx” extension, you need to change to a new price component. If you want to use this enhancement in your company, contact your account manager.

End of the caution.

Integration

SAP Reserve for Bad Debts constitutes a central subledger with separate master data and flow data management.

  • Integration of Position-Managing Systems

    Depending on the risk provision method and the analysis horizon, the source systems (SAP & non-SAP) are connected using standard, online interfaces (extractors) or standard, open interfaces.

    • “Expected Cash Flows” procedure (ECF procedure)

      In addition to an open interface that provides the relevant contract data, online interfaces (extractors) are available to connect the following SAP components and create and manage single risk provisions in accordance with the ECF procedure:

      • “SAP Loans Management for Banking, Suite Edition” (FS-CML) – also see Loans Management (FS-CML)

      • “SAP Collateral Management for Banking, Suite Edition” (FS-CMS)

    • “Future Analysis” single risk provision

      A standard, open interface is available to supply the contract data and collateral data relevant for forming and managing Value Adjustment and Reserve risk provision positions using future analysis based on the cash flow.

    • “Past Analysis” single risk provision

      To create and manage single risk provisions based on the analysis of positions and open items, you can use online interfaces (extractors) to connect the following SAP components:

      • “SAP Loans Management for Banking, Suite Edition” (FS-CML)

      • “SAP Deposits Management for Banking, Suite Edition” (S-B-BCA) – see also Bank Customer Accounts (BCA)

      • “SAP Deposits Management for Banking” (FS-AM)

      • “SAP Collateral Management for Banking, Suite Edition” (FS-CMS)

    • “RBD-ipx” extension (impairment processing extension)

      A standard, open interface is available for uploading data to the ipx framework that provides the relevant contract data and risk provision parameters.

    • Flat-rate value adjustment procedure

      SAP Reserve for Bad Debts provides an open interface that supplies the relevant contract data to create flat-rate value adjustments. A function exists for supplying the interface with relevant loan data when “SAP Loans Management for Banking, Suite Edition” is connected.

    • Confirmation to position-managing system

      For single risk provision, you can use a reverse extractor to transfer relevant information (risk class and RBD account number) back to the position-managing systems (for example, “SAP Loans Management for Banking”).

  • Connection to Financial Accounting

    You post transactions generated in SAP Reserve for Bad Debts to the connected general ledger in real time. For this purpose, integration of the financial accounting component “General Ledger Accounting” (FI-GL) is provided.

  • Connection to Regulatory Reporting

    You can use a BAdI to supply data to report preprocessing or the reporting software. The BAdI can extract the risk provision position as the balance at individual transaction or contract level, or it can extract the risk provision position as single positions.

Features

SAP Reserve for Bad Debts supports business processes that occur in relation to the risk provision for your loan transactions:

SAP Reserve for Bad Debts contains the following functions:

  • Modeling single risk provision at the level of risk units Contract, Partner, and Finance Project

    • For the “ECF procedure”, risk provision is managed for the risk provision positions “Value Adjustment” and “Reserve”.

      This procedure enables risk provision to be created in parallel for multiple financial accounting standards (such as international GAAP and local GAAP). This means that within a transaction valuated by a claims handler, the risk provision positions are calculated and managed at the same time in accordance with different financial accounting standards. This minimizes the manual tasks that need to be carried out by the claims handler.

      The ECF procedure offers extensive functions for modeling the expected cash flow – based on contractual cash flows, special payments, and the expected revenue from the liquidation of collateral. You can also model GAAP-specific book values for each single transaction using freely definable book value components. The ECF: Manual Contract Management function allows you to enter transactions from unconnected systems directly in SAP Reserve for Bad Debts, and to model other provisions such as process cost provisions.

    • For the “Future Analysis”, risk provision is managed for the risk provision positions “Value Adjustment” and “Reserve”.

    • For the “Past Analysis” risk provision is managed differently according to capital (effective capital, possibly reduced by applicable collateral values), open items for interest, and open items for charges. For systems managed by balance (such as checking account systems), risk provision is managed based on the debit balance.

  • The “RBD-ipx” extension features a flexible process framework for modeling flat-rate impairment procedures. The extension is specially designed to handle high data volumes through the use of parallel processing procedures.

  • Modeling of flat-rate risk provision

    Fully automated adjustment of transactions that are not included in single risk provision by a percentage defined in the system depending on their risk classification (such as the dunning level). Risk provision is managed at the level of single transactions and a distinction is made between risk provision for capital, open items for interest, and open items for charges.

  • Formation, posting, and position management of risk provisions while taking into account losses on receivables

    Calculation of the risk provision for each single transaction and transfer to the connected financial accounting system. Losses (write-downs) entered in the position-managing system or in SAP Reserve for Bad Debts are taken into account and the risk position is used accordingly or a direct write-off is posted.

  • The information system helps you to evaluate the risk provision positions.

Constraints

Transactions that are relevant to risk provision must be supplied to SAP Reserve for Bad Debts for processing, or manually selected from SAP Reserve for Bad Debts. Functions for automatically identifying transactions that are relevant for risk provision in the systems in which provisions are managed are not part of this offering.

The automatic update functions are not supported for the "borrower change" and "object change" processes because the effect of these business transactions on the risk provision position is not always unique from a business perspective. The claims handler can manually update the risk provision in SAP Reserve for Bad Debts.