Dear,
As you probably know, SAP recently released the new SAP S/4HANA for Financial Products Subledger https://www.youtube.com/watch?v=-veOZgkxllQ
There are many advantages on the SAP S/4HANA for Financial Products Subledger and I would need several articles for describing them, but today I will focus on its capacity for the efficient management of the Bank’s collaterals.
One of the main consequences of the 2008 Financial Crisis was the acknowledgement that the Financial System was severely under-capitalized; the issue was tackled with two complementary approaches.
Governments and Central Banks recapitalized the Financial System with Bail-Outs, Troubled Asset Relief Programs and Quantitative Easing Cycles.
Regulators put the focus on increasing and making visible the Capital Requirements with new Solvency and Accounting regulations (IFRS 9, IFRS 15, IFRS 16, IFRS 17, Basel III, Basel IV, etc.)
Recapitalizing the Financial System has been a temporary measure. Global debt has kept growing and weak economic growth has generated new capitalization tensions; more visible as the end of the Quantitative Easing Cycles has been announced in Europe.
With the normalization of the monetary policy Non Performing Assets will become illiquid, pushing down their value and increasing again the capitalization issues.
In this scenario of capital scarcity all forms of capital need to be managed efficiently, and collaterals are probably the form of capital with the poorest representation in the Bank's Information Systems.
Banking Information Systems are General Ledger centered, and as Collaterals are not represented in the Balance Sheet, Bank’s IT Architects have not paid much attention to their modelization.
As any other bank right or obligation, collaterals management has an Operational and an Analytical component.
The Operational management of collaterals focus in the technical details of the collateral and its contractual relationship with the asset, whose risk is hedging,
The Analytical management of collateral focus in the sustainable value of the collateral and its capacity for reducing the capital consumption, and limiting the impairment provision of the asset whose risk is hedging.
In Bank Analyzer and S/4HANA for Financial Products Subledger collaterals are modelled in two different objects.
As a SDL-Financial Transaction for representing the contractual relationship between the collateral and the asset.
As an RDL-entry representing the effective capacity of the collateral for reducing Credit Risk exposures and limiting impairment provisions.
Although a collateral has a Nominal Value, it can have several different Credit Risk mitigation capacities, according to the Solvency calculation approach that the bank is following; Simplified Standardized, Comprehensive Standardized, Foundation IRB and Advanced IRB.
Many times a group of collaterals is covering a group of exposures; determining the most efficient distribution of the collaterals to the exposures reduces the capital consumed which is the foundation of the Dynamic Management of Collaterals, one of the main Capital Optimization techniques.
High performance in-memory computing capabilities of HANA facilitates building simulation scenarios and stress-testing but before banks can take advantage of them, they must improve the representation of the collaterals in their Information Systems.
SAP Bank Analyzer and S/4HANA for Financial Products Subledger provides a centralized repository of collaterals, facilitating regulatory reporting, Risk Weighted Assets and Impairment provisions calculation, stress-testing of the collateral values and simulation scenarios for Capital Optimization.
This is just a brief description of some of the advantages of the Data Model of the Integrated Financial and Risk Architecture of SAP Bank Analyzer and S/4HANA for Financial Products Subledger. We’ll continue in future blogs.
Looking forward to read your opinions.
K. Regards,
Ferran.
www.capitency.com
Join the SAP Banking Group at: https://www.linkedin.com/groups/92860
Visit my SAP Banking Blog at: http://sapbank.blogspot.com/
Let's connect on Twitter: @FerranFrancesGi
Ferran.frances@capitency.com
As you probably know, SAP recently released the new SAP S/4HANA for Financial Products Subledger https://www.youtube.com/watch?v=-veOZgkxllQ
There are many advantages on the SAP S/4HANA for Financial Products Subledger and I would need several articles for describing them, but today I will focus on its capacity for the efficient management of the Bank’s collaterals.
One of the main consequences of the 2008 Financial Crisis was the acknowledgement that the Financial System was severely under-capitalized; the issue was tackled with two complementary approaches.
Governments and Central Banks recapitalized the Financial System with Bail-Outs, Troubled Asset Relief Programs and Quantitative Easing Cycles.
Regulators put the focus on increasing and making visible the Capital Requirements with new Solvency and Accounting regulations (IFRS 9, IFRS 15, IFRS 16, IFRS 17, Basel III, Basel IV, etc.)
Recapitalizing the Financial System has been a temporary measure. Global debt has kept growing and weak economic growth has generated new capitalization tensions; more visible as the end of the Quantitative Easing Cycles has been announced in Europe.
With the normalization of the monetary policy Non Performing Assets will become illiquid, pushing down their value and increasing again the capitalization issues.
In this scenario of capital scarcity all forms of capital need to be managed efficiently, and collaterals are probably the form of capital with the poorest representation in the Bank's Information Systems.
Banking Information Systems are General Ledger centered, and as Collaterals are not represented in the Balance Sheet, Bank’s IT Architects have not paid much attention to their modelization.
As any other bank right or obligation, collaterals management has an Operational and an Analytical component.
The Operational management of collaterals focus in the technical details of the collateral and its contractual relationship with the asset, whose risk is hedging,
The Analytical management of collateral focus in the sustainable value of the collateral and its capacity for reducing the capital consumption, and limiting the impairment provision of the asset whose risk is hedging.
In Bank Analyzer and S/4HANA for Financial Products Subledger collaterals are modelled in two different objects.
As a SDL-Financial Transaction for representing the contractual relationship between the collateral and the asset.
As an RDL-entry representing the effective capacity of the collateral for reducing Credit Risk exposures and limiting impairment provisions.
Although a collateral has a Nominal Value, it can have several different Credit Risk mitigation capacities, according to the Solvency calculation approach that the bank is following; Simplified Standardized, Comprehensive Standardized, Foundation IRB and Advanced IRB.
Many times a group of collaterals is covering a group of exposures; determining the most efficient distribution of the collaterals to the exposures reduces the capital consumed which is the foundation of the Dynamic Management of Collaterals, one of the main Capital Optimization techniques.
High performance in-memory computing capabilities of HANA facilitates building simulation scenarios and stress-testing but before banks can take advantage of them, they must improve the representation of the collaterals in their Information Systems.
SAP Bank Analyzer and S/4HANA for Financial Products Subledger provides a centralized repository of collaterals, facilitating regulatory reporting, Risk Weighted Assets and Impairment provisions calculation, stress-testing of the collateral values and simulation scenarios for Capital Optimization.
This is just a brief description of some of the advantages of the Data Model of the Integrated Financial and Risk Architecture of SAP Bank Analyzer and S/4HANA for Financial Products Subledger. We’ll continue in future blogs.
Looking forward to read your opinions.
K. Regards,
Ferran.
www.capitency.com
Join the SAP Banking Group at: https://www.linkedin.com/groups/92860
Visit my SAP Banking Blog at: http://sapbank.blogspot.com/
Let's connect on Twitter: @FerranFrancesGi
Ferran.frances@capitency.com
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