Dear SAP Banking community members,
Lasts weeks I’ve been working in preparing some demos and presentations for clients.
By working on them I’ve had the chance of thinking in the SAP Banking Architecture from a different perspective, wider than what we normally do when we’re working in a specific implementation.
One of the client requirements referred to the capacity of looking to an impaired loan from different perspectives.
• The Client perspective or perspective of the contracted conditions.
• The Accounting perspective or valuation perspective according to the GAAP of the Bank’s country.
• Some specific analytical requirements of the regulatory authorities of the Bank’s country.
The differences between the first two perspectives seem obvious, and of course they’re fully covered by SAP Banking.
Nevertheless, what’s obvious for the SAP Banking Architecture does not have to be for older Banking systems (thanks Armin for your contribution on this).
Many legacy systems do not delimit clearly the boundaries between the Operational world and the Analytical (Accounting and Solvency) world, generating important difficulties.
A very clear difference of these two perspectives is the interpretation of the “economic event” impairment. This economic event means that the chances of the client fulfilling his payment obligations have been reduced, and the Accounting Principles must recognize the losses on the value of the non-performing loan. But the contracted conditions remain the same as the client obligations are not impacted by these losses (prudence requires posting the losses but the bank will try to get the money).
For some Banking systems this is not a simple requirement, as the boundaries between accounting and Loans management are not clear enough, and consequently some processes can be overlapped.
And here comes another relevant advantage of the SAP Banking Architecture, as SAP has defined clearly the boundaries of the Operational perspective (the client’s perspective in Loans Management) and the Accounting perspective (Bank Analyzer), we can define more than one Accounting interpretation of the same economic event.
For instance, a payment delay by the client has different interpretations from the perspective of different Accounting principles. Typically, the Fair Value of an impaired loan is not necessarily the same according to the International Financial Reporting Standards or the Bank’s country local GAAP.
But even more, the open architecture of Bank Analyzer offers us the possibility of having more interpretations of the same economical event as the number of Accounting models is not limited to IFRS or the particular local GAAP.
Once again, it comes to my mind an idea that the Finance professor of my MBA used to remind us “Cash-Flow is a fact, the result just an opinion”, or as it happens on this case, several opinions.
Looking forward to read your comments.
Kindest Regards.
Ferran.
Lasts weeks I’ve been working in preparing some demos and presentations for clients.
By working on them I’ve had the chance of thinking in the SAP Banking Architecture from a different perspective, wider than what we normally do when we’re working in a specific implementation.
One of the client requirements referred to the capacity of looking to an impaired loan from different perspectives.
• The Client perspective or perspective of the contracted conditions.
• The Accounting perspective or valuation perspective according to the GAAP of the Bank’s country.
• Some specific analytical requirements of the regulatory authorities of the Bank’s country.
The differences between the first two perspectives seem obvious, and of course they’re fully covered by SAP Banking.
Nevertheless, what’s obvious for the SAP Banking Architecture does not have to be for older Banking systems (thanks Armin for your contribution on this).
Many legacy systems do not delimit clearly the boundaries between the Operational world and the Analytical (Accounting and Solvency) world, generating important difficulties.
A very clear difference of these two perspectives is the interpretation of the “economic event” impairment. This economic event means that the chances of the client fulfilling his payment obligations have been reduced, and the Accounting Principles must recognize the losses on the value of the non-performing loan. But the contracted conditions remain the same as the client obligations are not impacted by these losses (prudence requires posting the losses but the bank will try to get the money).
For some Banking systems this is not a simple requirement, as the boundaries between accounting and Loans management are not clear enough, and consequently some processes can be overlapped.
And here comes another relevant advantage of the SAP Banking Architecture, as SAP has defined clearly the boundaries of the Operational perspective (the client’s perspective in Loans Management) and the Accounting perspective (Bank Analyzer), we can define more than one Accounting interpretation of the same economic event.
For instance, a payment delay by the client has different interpretations from the perspective of different Accounting principles. Typically, the Fair Value of an impaired loan is not necessarily the same according to the International Financial Reporting Standards or the Bank’s country local GAAP.
But even more, the open architecture of Bank Analyzer offers us the possibility of having more interpretations of the same economical event as the number of Accounting models is not limited to IFRS or the particular local GAAP.
Once again, it comes to my mind an idea that the Finance professor of my MBA used to remind us “Cash-Flow is a fact, the result just an opinion”, or as it happens on this case, several opinions.
Looking forward to read your comments.
Kindest Regards.
Ferran.
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