Financial Calculations for Personal Financial Statements
The details of the personal financial statement collected during the account origination process are used to evaluate the customer’s credibility to repay the loan. The system uses BRFplus to calculate the following ratios:
Disposable income
In the standard system, the disposable income is calculated as a monthly value. It is the sum of all income items minus the sum of all expense items.
Net worth
In the standard system, the net worth is calculated as the sum of all asset items minus the sum of all liability items.
Total debt service ratio (TDSR)
TDSR is a measure that financial lenders use as a rule of thumb to give a preliminary assessment of whether a potential borrower is already in too much debt. This ratio shows the proportion of income that is already spent on outgoing payments. We deliver a sample formula to calculate the TDSR. The following values are transferred to the business rule to calculate the TDSR:
Monthly commitment (sum of the expense and liability items relevant for TDSR )
You can indicate that the liability should be included in the total debt service ratio calculation.
In the sample implementation, only those liability items (and linked expenses) are considered in the TDSR calculation for which the TDS indicator has been set. For certain liability types, the balance amount and the balance amount percentage are used to calculate the monthly commitment.
Monthly income (sum of all income items in the personal financial statement)
The TDSR is the monthly commitment divided by the monthly income multiplied by 100.
Net excess or shortfall
For real estate assets, the system calculates net excess or shortfall to determine if this is to be considered in the monthly commitment or income. If the calculation results in a positive value, it is added to the monthly income. If the calculation results in a negative value, it is added to the monthly commitment.
Note
Even though these ratios are calculated when the personal financial statement is being maintained, they are used when the banking customer quote is processed.
To use this function, you must activate the business function CRM-FS, Guided Loan Origination Process
(CRM_FS_NBRNWL_1
).
Features
During calculation, the system uses the ownership percentage to calculate the actual value of the asset.
Example
If the balance amount in a deposit account is EUR 10000 with an ownership percentage of 50%, then the actual value of this asset is EUR 5000 while calculating net worth or TDSR.
Activities
If required, you can change the delivered rules or create your own rules. You can also influence how you identify the required business partner role for the calculation of the personal financial statement. For more information see BRFplus for Account Origination.