unit 1. overview lm
TRANSCRIPT
© SAP AG FS210 1-1
SAP AG 2006
Unit 1: Overview of Loans Management
Unit 1Overview of Loans Management
FS210 Loans Management for Financial Services
© SAP AG FS210 1-2
SAP AG 2006
Overview of Loans Management: Contents
This topic covers the following lessons:
� Information on Loans Management (LM)
� Overview of the processes in Loans Management
� Overview of the product categories in Loans
Management
� Integration of Loans Management with other SAP
modules
© SAP AG FS210 1-3
SAP AG 2006
Overview of LM: Unit Objectives
After completing this unit, you will be able to:
� Describe Loans Management in the SAP product
landscape
� Differentiate between product categories and their
special features in Loans Management
� Describe the business process of a loan reflected in
Loans Management, and
� Provide information on which other SAP applications
and add-ons support and enhance the functions of
Loans Management.
© SAP AG FS210 1-4
SAP AG 2006
Overview of LM: Overview Diagram
Course Overview
Overview of Loans Management
New Business
Position Management
Cash FlowDisturbances
Customizing
© SAP AG FS210 1-5
SAP AG 2006
Unit 1: Overview of Loans Management
Unit 1Overview of Loans Management
FS210 Loans Management for Financial Services
© SAP AG FS210 1-6
SAP AG 2006
Information on Loans Management
Overview of Loans Management
� Lesson 3: Product Categories
� Lesson 4: Integration with other SAP Modules
� Lesson 1: Information on Loans Management
� Lesson 2: Processes in Loans Management
© SAP AG FS210 1-7
SAP AG 2006
Information on LM: Unit Objectives
At the end of this lesson, you will know:
� What Loans Management is
� What customers can expect by implementing Loans
Management
� How Loans Management has developed, and
� How and where Loans Management is already being
used.
© SAP AG FS210 1-8
SAP AG 2006
Information on LM: The Term
CCCCMMMMLLLL
onsumer &ortgageoans
SAP LSAP LSAP LSAP LoansMMMManagement
© SAP AG FS210 1-9
SAP AG 2006
Information on LM: Scope of Functions
SAP LLLLoans MMMManagement is the SAP solution for process-
oriented and highly automated handling of loan transactions
for banks, insurance companies and businesses:
� User-friendly illustration of the entire lifecycle of a loan from a new business with acquisition phase and loan contract completion to credit processing with payment transactions and position management up to financial accounting with comprehensive reporting.
� Smooth management of both standardized and consulting-intensive credit products with complex condition variants.
� High integration potential in an existing system landscape
using LM application architecture.
© SAP AG FS210 1-10
SAP AG 2006
Information on LM: Development History
*) Enterprise Add-On Financial Services
Course Content
EA Fin-serve* 5.0
LSRE(Loans,
Securities,Real
Estate)
IS-B(Industrial
Solution
Banking)
R/3 < 4.6x R/3 4.6xR/3 Enterprice
4.7xERP 2004
1991 1996 1997 2002 2003 200520042000
EA Fin-
serve* 1.1EA Fin-serve* 2.0
SAP Banking 4.6x
ERP 2005
SAPLoansMana-gement
TReasury
LOans
Core Banking
Mortgage
Loans
Consumer &
Mortgage
Loans
EA Fin-serve* 6.0
© SAP AG FS210 1-11
SAP AG 2006
Information on LM: Circulation Growth
Installations of LM
� More than 700 installations� In over 50 countries
LM Bank Customers
� 40 of the most significant German banks
� 5 Austrian banks� Renowned banks in Holland,
Brazil, Hungary, Korea...
LM Insurance Customers
� More than 50 insurance companies
© SAP AG FS210 1-12
SAP AG 2006
Information on LM: User Basis
Just a few examples . . .
. . . of LM customers worldwide!
© SAP AG FS210 1-13
SAP AG 2006
Standard Loans Management
Information on LM: The Expectations
Master Data Management
Central Business Partner
Securities
Object management
Credit standingcheck
Back Office Support
Efficientdata entry
Masscorrespondence
Integrated accounting
Automatedprocessing
Opticalarchiving
Standardizedapplication
process
Methodicalcontract
management
Flexible conditions
Simpleproduct
configuration
Technical Aspects
Latest technology
Integration
Customer-specific customizing
Analysis
Closely connected to a Business Warehouse
Drilldown reportingwith standard reports
Drilldown reportingwith your own reports
What can SAP customers
expect of LM?
This is what SAP customers
can expect of LM!
Performance
© SAP AG FS210 1-14
SAP AG 2006
Information on LM: Summary
Now you know...
� What Loans Management is
� What customers can expect by implementing Loans
Management
� How Loans Management has developed, and
� How and where Loans Management is already being
used.
© SAP AG FS210 1-15
SAP AG 2006
Processes in Loans Management
Overview of Loans Management
� Lesson 1: Information on Loans Management
� Lesson 2: Processes in Loans Management
� Lesson 3: Product Categories
� Lesson 4: Integration with other SAP Modules
© SAP AG FS210 1-16
SAP AG 2006
Processes in LM: Process Overview
Expiry of Contract
Information System
Cash Flow Disturbances
Arrears
Waiver
Execution
Rollover
Cleanup
Position Management
FullDisbmt
New Business
Start
Withdrawal
Cancellation Early payoff
Scheduled discon.
SAP Loans Management maps and supports all processes
in the various lifecycles of a loan.
� New Business
• Definition of business partners, role assignment and credit scoring
• Illustration of contract acquisition using the conclusion of the contract and disbursement of the loan
� Position Management
• Contract processing, for example, searching, displaying and changing loans
• Carrying out debit positions, incoming payment management and postings
• Closing, valuation and management tasks
� Cash Flow Disturbances
• Changes to the contract (for example, reduction, withdrawal and business operations such as payoff,
deferral and notice)
• Accounting, for example, underpayment, dunning, interest on arrears and value adjustments
� Expiry of Contract
• Closing operations after the end of the contract
• Archiving expired loans
� Information System
• Evaluating accounting, drilldown, and reports
© SAP AG FS210 1-17
SAP AG 2006
Processes in LM: New Business
The New Business process combines all contract
acquisition activities from completing a contract to fully
disbursing a loan.
Creating FS Business Partners Accepting credit
queries
Creating offers
Checking credit standing
Checking securities
Partial and full disbursements
Creating loan contracts
New Business
© SAP AG FS210 1-18
SAP AG 2006
Processes in LM: Process Overview
The Position Management process includes all functions
for mapping and maintaining the scheduled lifecycle of a
loan.
Processing business operations
Display/maintain master data
Rollovers
Closing operations and valuation
Debit position
Accounting
Accruals/deferrals
Changes to contracts
Position Management
© SAP AG FS210 1-19
SAP AG 2006
Processes in LM: Process Overview
The Cash Flow Disturbances processes include all
activities that arise as a result of the borrower inadequately
settling due receivables.
Dunning open items
Interest on arrears
Business operations
Write-offs and waivers
Value adjustments
Cash Flow Disturbances
© SAP AG FS210 1-20
SAP AG 2006
Processes in LM: Process Overview
In addition to the scheduled end of a loan, there are many
points in the lifecycle at which a loan can expire. These
processes are grouped in Expiry of Contract.
Waiver
ExecutionWithdrawal
Cancellation
Early payoff
Scheduled discontinuation
Discontinuation after rollover
Expiry of contract
© SAP AG FS210 1-21
SAP AG 2006
Processes in LM: Process Overview
The Information system processes include LM's own
reporting and regulatory reporting and also using
information in other data analysis systems.
LM's own evaluations
Data extraction for bank
analyzers
Evaluations using Business
Warehouse
Regulatory reporting
Deadline monitoring
SEM Banking analysis of
results and risk analysis
Accounting evaluations
Information System
© SAP AG FS210 1-22
SAP AG 2006
Product Categories
Overview of Loans Management
� Lesson 3: Product Categories
� Lesson 4: Integration with other SAP Modules
� Lesson 1: Information on Loans Management
� Lesson 2: Processes in Loans Management
© SAP AG FS210 1-23
SAP AG 2006
Product Categories: Unit Objectives
After completing this lesson, you will be able to:
� Name and define product categories managed in Loans
Management
� Distinguish which product category provides suitable
functions and process for which task.
© SAP AG FS210 1-24
SAP AG 2006
Product Categories: Definition
SAP Loans Management supports various loan forms called
Product Categories.
These product categories affect the following,
among others:
� Processes of account origination
� Transaction processing
� Loan conditioning
� User guide
� Processing securities
� Possible business operations
� Rollover activities …
© SAP AG FS210 1-25
SAP AG 2006
Product Categories: Overview
Administration of active loans (given)
Administration of passive loans (taken)
Policy loans
Con-sumer loans
Loans
Manage-
ment
Mort-gage loans
Generalloans
Borrower's note loans
Installment loans
� Product Categories in Loans Management:
• Mortgage Loans: Loans that are linked to a lien upon real property (encumbrance).
• Borrower's Note Loan: Loans that are secured by a borrower's note.
• Policy Loans: Loans connected with an insurance policy (for example, an endowment policy).
• Consumer Loans: Loans with a classic installment rate for financing personal purchases (as of ERP
2004).
• General Loans: Includes mapping all other loans (employee loans, large-scale loans, business
financing…).
• Installment Loans: Maps installment credit loans that are repaid on the basis of the incoming
payment principle and can be adjusted to customer needs (from ERP 2005).
� Passive Loans:
• The administration of passive loans is:
- only possible on the non-debit side,
- only possible for the Mortgage Loans and General Loans product categories, and
- does not have the full scope of functions as for active loans.
• Investor Contract: Used only for administrating passive investor contracts in syndications
management.
© SAP AG FS210 1-26
SAP AG 2006
Product Categories: Mortgage Loans
Characterization
� Application: construction financing
� Mostly annuity repayment
� Interest rate: for a certain time permanently agreed in a contract, with high-quality collateral comparably low
� Term: medium- to long-term
� Collateral: mortgage, land charge
A Mortgage loan is a long-term loan, for which an
encumbrance is entered in the register for hedging
purposes. It is an established form of construction financing
with a long tradition.
Mort-gage loans
Policy loans
Con-sumer loans
LoansManage-
ment
Generalloans
Borrower's note loans
Installment loans
A Mortgage loan is a long-term loan, for which an
encumbrance is entered in the register for hedging
purposes. It is an established form of construction
financing with a long tradition.
© SAP AG FS210 1-27
SAP AG 2006
Product Categories: Mortgage Loans in LM
Special Features
� Flexible usage: as loans given or taken (but not on the debit-side), according to plan or actual principle
� Comprehensive account origination process: interested party, application, decision-making, offer, contract
� Flexible conditioning: representing all possible constellations
� Integrated collateral management: for land charges and mortgages as well as
the affected objects (land, buildings) including collateral value calculation
� Rollover system
The Mortgage Loan product category in LM provides
the largest scope of functions for representing a loan
transaction:
Mort-gage loans
Policy loans
Con-sumer loans
LoansManage-
ment
Generalloans
Borrower's note loans
Installment loans
© SAP AG FS210 1-28
SAP AG 2006
Special Features
� Comprehensive Usage: loans given or taken (but not on the debit-side), according to plan or actual principle
� Business acquisition process: application, offer, contract
� Conditioning: all possible variations from interest rates, repayment types, terms …
� Collateral: possible to integrate various objects and different collateral
� User guide and Loans Management are fundamentally the same as the Mortgage Loan product category
Product Categories: General Loans in LM
The General Loan product category allows you to manage
other loans that should not be represented using another
product category, for example, employee loans or
intercompany loans.
Generalloans
Mort-gage loans
Policy loans
Con-sumer loans
LoansManage-ment
Borrower's note loans
Installment loans
© SAP AG FS210 1-29
SAP AG 2006
Product Categories: Borrower's Note Loans
Characterization
� Application: uncommitted
� Repayment: all possible variants
� Interest rate: fixed according to agreement or bound to a reference interest rate
� Term: medium- to long-term
� Collateral: no further collateral required withexcellent credit standing
Borrower's note loans are large loans for first-class
companies and public institutions with long-running terms
and structural features similar to those of bonds, with
which listed borrower's notes can be issued.
Borrower's note loans
Mort-gage loans
Policy loans
Con-sumer loans
LoansManage-ment
Generalloans
Installment loans
� Borrower's note loans are taken up by commercial businesses, public institutions, special credit
institutions and supranational borrowers.
� Lenders are primarily insurance companies, real-estate credit institutions and savings banks.
� The advantage for both parties is simple handling. Another advantage is that even companies not
capable of issue have access to the capital market. Another positive aspect for lenders is that there are
currently no necessities for write-offs by decreasing long-term investment rates.
� Borrower's notes can also be passed on independent of their structure. The number of permitted
assignments is usually agreed on when the first purchase is carried out.
© SAP AG FS210 1-30
SAP AG 2006
Product Categories: Borrower's Note Loans in LM
The borrower's note loan (BNL) LM product category has
the necessary functions for administrating the complete
process using specially developed order management.
Special Features
� With Order Management:
� Standard final repayment, standard fixed interest rate for a fixed interest period
� Business acquisition process: reservation and contract
� Functions for the borrower's note: purchase order and sale order
� Special collective processing
� Non-debit side, only as loans given
� Without Order Management:
� Similar to the General Loan product category with all condition and repayment variants
� Debit side and non-debit side,loans given and taken
Borrower's note loans
Mort-gage loans
Policy loans
Con-sumer loans
LoansManage-ment
Generalloans
Installment loans
� General
• In Loans Management, you can map both loans given against a borrower's note and also trading with
borrower's notes using order management.
• Alternatively, you can generate a borrower's note loan, similar to the General Loan product category,
as a normal loan with all imaginable contract constellations.
� Participating Business Partners
• The business partners are assigned the roles of issuer and counterparty. This occurs using business
partner management or when entering an order.
• Every borrower's note must be assigned an issuer serving as the main loan partner.
© SAP AG FS210 1-31
SAP AG 2006
Product Categories: Policy Loans
Characterization
� Application: uncommitted
� Repayment: maturity
� Interest rate: securely agreed up to the end of a contract
� Term: up to the date of disbursement of the sum insured in the case of survival
� Security: (able to buy back)
endowment policy
A life insurance company grants policy loans. The policy
serves as a loan security and is typically used to repay a
loan.
Policy loans
Mort-gage loans
Con-sumer loans
LoansManage-ment
Generalloans
Borrower's note loans
Installment loans
� Even numerous financial institutions grant loans contrary to assigning an insurance policy. However,
only the cash surrender value of the insurance is recognized mostly as collateral.
� Taking out a policy loan generally does not affect insurance policy coverage. However, the insurance
company will subrogate rights to the insurance policy.
© SAP AG FS210 1-32
SAP AG 2006
Product Categories: Policy Loans in LM
Special Features
� Limited usage: only for loans given, according to plan principle or actual principle, with or without connected customer
� Shortened account origination process: offer, contract
� Flexible conditioning: mappingall possible constellations
� Integrated collateral management: for endowment policies
The policy loan LM product category concentrates the
options of LM on the functions necessary for mapping
policy loans.
Policy loans
Mort-gage loans
Con-sumer loans
LoansManage-ment
Generalloans
Borrower's note loans
Installment loans
� As is with a new mortgage business, the master data to be managed to a policy loan in the SAP system
contains both the basic loan data that reflects the fundamentally descriptive and classifying information
on loans and also the conditions which are individually based on contracts.
� The process of creating a contract is structured almost the same as creating a mortgage loan contract.
The difference is that when you create a policy loan contract collateral can be stored, but not objects
(this means that the objects tab is hidden).
© SAP AG FS210 1-33
SAP AG 2006
Product Categories: Consumer Loans
A consumer loan is a loan with a low amount of credit
to private households, which provides financing for
consumer products.
Characterization
� Usage: consumer products
� Repayment: fixed annuity rates
� Interest rate: securely agreed up to the end of a contract
� Term: short- to medium-term (typically up to six years)
� Collateral:
� None
� Credit amounts and credit rates set according to regular income
� Where applicable, credit life insurance, accident insurance and occupational disability insurance
Con-sumer loans
Mort-gage loans
Policy loans
LoansManage-ment
Generalloans
Borrower's note loans
Installment loans
© SAP AG FS210 1-34
SAP AG 2006
Product Categories: Consumer Loans in LM
Special Features
� Limited usage: only for loans given, only according to target principle, and only with an affiliated customer
� Special account origination process: model calculation, application, offer, contract with its own user interface
� Product definition: simple to define and adapt to the general conditions of a loan
� Conditioning: always annuity, utilization of condition tables
� Special business operations (deferral...)
� Management methods based on
customer-specific calculation modules for credit insurance
The Consumer Loan LM product category is characterized
by a scope of functions adapted to industrial credit lending
and a strict user guide.
Con-sumer loans
Mort-gage loans
Policy loans
LoansManage-ment
Generalloans
Borrower's note loans
Installment loans
© SAP AG FS210 1-35
SAP AG 2006
Characterization
� Usage: consumer products and capital goods
� Repayment: fixed or variable rates depending on selected product, payment on maturity, may be paid off partially or fully in the interim or repayable and available as rolling over
� Interest rate: fixed or variable depending on
selected product, calculated according to the incoming payment principle
� Term: medium- to long-term
� Collateral:
� No special collateral
� Can be combined with different insurance companies
Product Categories: Installment Loans
Installment loans
Con-sumer loans
Mort-gage loans
Policy loans
LoansManage-ment
Generalloans
Borrower's note loans
An installment loan is a loan for financing consumer
products and medium to large capital goods. Largely as a
result of its form, it is commonly used on the US market in
particular.
© SAP AG FS210 1-36
SAP AG 2006
Product Categories: Installment Loans in LM
Special Features
� Its own interface with the corresponding functions
� Product definition: simple to define and adapt to the general conditions of a loan
� Various pay-off schemes (see below)
� Incoming payment principle clears incoming payments on the day they are received: settlement of the actual interest share + the remainder for repayment
� Stop Management for suppressing certain processes and for displaying warning messages
� Integrated management of typical credit insurance in combination with collateral management
The structure of the Installment Loan product category
is similar to the structure of a consumer loan. However,
the installment loan offers far more comprehensive
functionality.
Installment loans
Con-sumer loans
Mort-gage loans
Policy loans
LoansManage-ment
Generalloans
Borrower's note loans
� Pay-Off Schemes
• Fixed rate installment loans (FRIL) - fixed interest rate with a constant rate
• Variable rate balloon loans (VRBL) - variable interest rate, final payment share ("Balloon")
• Adjustable rate installment loans (ARIL) - adjustable rate for every rate adjustment using the same
term
• Variable single pay installment loans (VSPIL) - one single payment at the end of a term including
accrued interest
© SAP AG FS210 1-37
SAP AG 2006
Product Categories: Summary
You are now able to
� Name and define product categories managed in Loans
Management
� Distinguish which product category provides suitable
functions and process for which task
© SAP AG FS210 1-38
SAP AG 2006
Integration with Other SAP Modules
Overview of Loans Management
� Lesson 3: Product Categories
� Lesson 4: Integration with other SAP Modules
� Lesson 1: Information on Loans Management
� Lesson 2: Processes in Loans Management
© SAP AG FS210 1-39
SAP AG 2006
Integration: Lesson Objectives
At the end of this lesson, you will know:
� The SAP applications and add-ons with which SAP Loans
Management works
� To what extent SAP applications and add-ons use
information from Loans Management for further
processing, and
� Which SAP applications and add-ons handle special
tasks for Loans Management
© SAP AG FS210 1-40
SAP AG 2006
Integration with Other SAP Modules
SAP Loans Management can use various cross-references
to other SAP modules and services.
� A series of SAP applications completes Loans
Management using its functions such as managing
business partners and collateral.
� Other SAP applications extract data from Loans
Management for different analyses and actions
such as value adjustments, risk assessments and
calculations.
© SAP AG FS210 1-41
SAP AG 2006
Integration with Other SAP Modules: Overview
FI
CM
TRM
SM
CRM
RBD
Analysis
ToolsSAP BP
Loans
Manage-
ment
© SAP AG FS210 1-42
SAP AG 2006
Integration with Other SAP Modules: CRM
Significance for Loans Management
� The mySAP CRM system links CRM process with the solutions in the SAP Core Banking areas.
� As a part of account origination, now you can fully see the originationprocess of a loan all the way to the conclusion of a contract in CRM.
� Furthermore, CRM also works smoothly with applications from other providers.
mySAP CCCCustomer RRRRelationship MMMManagement offers the
most up-to-date features and functions that you can use to
provide precise services to win and affiliate customers to
your own business.
FI
CM
TRM
SM
CRM
RBD
AnalysisTools
SAP BP
LoansManage-ment
� Conclusion
• The CRM system links CRM processes with the solutions in SAP Core Banking, Strategic Enterprise
Management and Business Information Warehouse.
© SAP AG FS210 1-43
SAP AG 2006
Integration with Other SAP Modules: SAP BP
The SAP FFFFinancial SSSServices BBBBusiness PPPPartner is the
SAP application for saving and managing all customer
information for all Financial Services applications.
Significance for Loans Management
� People have an assigned role at a bank (for example, account holder, borrower, and guarantor).
� Business partner relationships can be linked with each other in many ways.
� There are functions for generating borrower and risk entities.
SAP BP
FI
CM
TRM
SM
CRM
RBD
AnalysisTools
LoansManage-ment
� Functions:
• SAP Business Partner describes natural people, companies, groups of natural people or organization
groups, in which a company has a business interest.
• The solution is based on the role concept. This makes it possible to centrally collect and generate
general data and also to save additional data according to business necessity.
• You can display a wide spectrum of interfaces and functions. The SAP Business Partner is closely
connected to other components. This guarantees a thorough process.
• The SAP Business Partner allows you to expand fields specific to customers without modifications.
� The most important Business Partner data includes:
• Name and address of the business partner
• Supplementary data dependent on the business partner category (such as date of birth, legal form) for
all areas of application
• Relationships (for example, borrower entities, group structures, marriage partnerships, private
companies)
• Legitimation data and additional partner numbers
� Note:
• In earlier SAP versions, there was additional data retention based on the Financial Services
requirements with the Financial Services Business Partner (FS BP) components. The double data
management associated with it and its parallel maintenance (for example, basic data in the BP000
and BUT000 tables) has been set in SAP Business Partner since ERP 2005.
• Exception: when using the Real estate (RE Classic) application
© SAP AG FS210 1-44
SAP AG 2006
Integration with Other SAP Modules: CM
Significance for Loans Management
� Administration and evaluation of the securities agreed in the lending process and objects belonging thereto
� Displays the hedged items in Loans Management and makes the transition to CM possible
� Evaluates loan security according to the legal specifications and supports various approaches to risk management using Basel II
The SAP CCCCollateral MMMManagement for Banking is an
operational position management system for objects and
collateral agreements.
FI
CM
TRM
SM
CRM
RBD
AnalysisTools
SAP BP
LoansManage-ment
� Functions:
• CM asset management includes functions for managing and evaluating assets agreed as collateral
(real estate, ships, rights, securities, movable goods...). The relevant values from value determination
are imported to CM collateral management using interfaces.
• CM collateral management includes business logic and the processes for managing and evaluating a
collateral (encumbrances, warranty, assignment...). The collateral agreement is formed here. The
transactions to be secured are referenced.
� Advantages:
• Central source system for front-end and back-end applications
• Supports risk mitigation according to Basel II
• Efficient processes for processing collateral
• Open framework for managing collateral (stand-alone)
� Comment:
• Loans Management contains several options for asset and collateral management that will not be
developed further and therefore will not meet the Basel II requirements.
• CM is a successor to the solution integrated in Loans Management with real added value!
© SAP AG FS210 1-45
SAP AG 2006
Integration with Other SAP Modules: FI
Significance for Loans Management
� G/L connection for Loans Management
� Accounts receivable accounting with relevant dunning and calculation of interest on arrears
� Carrying out payment transactions
� Assignment of incoming payments
SAP FIFIFIFInancial Accounting takes into account international
accounting principles such as IFRS and US-GAAP and
supports bank-specific G/L accounting requirements.
FI
CM
TRM
SM
CRM
RBD
AnalysisTools
SAP BP
LoansManage-ment
© SAP AG FS210 1-46
SAP AG 2006
Integration with Other SAP Modules: TRM
The Transaction Manager as a component of TTTTreasury and
RRRRisk MMMManagement (TRM) is a high-performance instrument
for implementing an efficient liquidity, portfolio and risk
management.
Significance for Loans Management
� The Transaction Manager supports not only one but several parallel balance sheet views of managed positions and transactions that each provide a complete, value-based display of the positions.
� This allows you to control the positions
and position-relevant flows in Loans Management according to different accounting rules and regulations.
FI
CM
TRM
SM
CRM
RBD
AnalysisTools
SAP BP
LoansManage-ment
� The Transaction Manager offers the option of carrying out liquidity and risk analyses. Decisions on
future investments and borrowings can be made based on these analyses and the corresponding current
conditions of the money and capital markets.
� The Transaction Manager
• supports your financial transaction and position management. This involves trading and back office,
and the connection to Financial Accounting.
• helps you utilize existing rationalization and enables you to automate typical processes.
• provides flexible reporting and evaluation structures for analyzing financial transactions, positions
and portfolios.
• allows you to assess directly the effects of financial transactions on liquidity and interest rate risk
using the integration with Treasury and Risk Management.
© SAP AG FS210 1-47
SAP AG 2006
Integration with Other SAP Modules: RBD
Significance for Loans Management
� Useful for asset-side customer loans
� Automated extraction of the relevant data from Loans Management
� Risk class returned to Loans Management
� Creating and posting value adjustments
The SAP component, RRRReserve for BBBBad DDDDebts, provides
integrated, automated system support for recognizing,
creating, and posting value adjustments and for prompt
information on risk control.
RBDFI
CM
TRM
SM
CRM
AnalysisTools
SAP BP
LoansManage-ment
� Functions:
• Risk Monitoring: Creating and evaluating risk portfolios � Allows you to recognize the default risks.
� Value adjustment proposals.
• Risk Provision: Value adjustment postings are supported with regard to initial appropriation of funds,
subsequent appropriations following outgoing payments and risk changes and divestitures following
incoming payments. This results in the adjusted revenues and positions.
• Risk Realization: Posting the loss on receivables supports the divestment/usage of the value adjustment and the write-off of the remaining receivables.
� Differentiates between
• Individual Value Adjustments (IVAs) separately for effective capital as well as interest and charges
• Flat-rate value adjustements (FRVAs)
� Advantages:
• Implementation as independent add-on
• Supports the processes of risk monitoring, risk provision and risk realization for asset-side customer loans
• Links to SAP FI Financial Accounting in a real-time posting interface
� Comment:
• This product is currently being used in Germany only. After consulting with SAP, it would be
possible to use this product in other countries.
© SAP AG FS210 1-48
SAP AG 2006
Significance for Loans Management
� You can fuse loans to tranches according to user-defined rules within a pool.
� Selling portfolios is possible after the "true sale" procedure or artificial securitization.
� Servicing for the investor can be carried out in Loans Management like accounting management and business operations management
(for example, cash flow disturbances and loss).
� Transferring data to SAP modules like FI and LM is carried out using interfaces.
Integration with Other SAP Modules: SM
SSSSyndications MMMManagement allows you to manage loan
portfolios that should be sold or have already been sold to
refinance investors.
SM
FI
CM
TRM
CRM
RBD
Tools for analyses
SAP BP
LoansManage-ment
� Syndications Management uses the Investor Contract product category from Loans Management to
manage investor contracts.
© SAP AG FS210 1-49
SAP AG 2006
Significance for Loans Management
� SAP Business Warehouse provides analysis and evaluation instruments, which are able to improve performance for business planning and controlling.
� BW gives you flexible reporting options using data that is stored
in Loans Management, other SAP modules or also in external systems.
� For this prupose, LM provides data extractors and content for the most significant master data and flow data.
Integration with Other SAP Modules: BW
The SAP BBBBusiness Information WWWWarehouse allows data from
all possible sources to be integrated and makes sure that
business-critical information is quickly and directly sent to
where it is needed.
AnalysisTools
FI
CM
TRM
SM
CRM
RBD
SAP BP
LoansManage-ment
© SAP AG FS210 1-50
SAP AG 2006
Significance for Loans Management
� Using predefined reporting and analysis scenarios in the Bank Analyzer, key figures typical for banks (from the settlement NPV to the net interest margin) and different characteristics such as the order number and currency can be created and evaluated automatically.
� Bank Analyzer supports the new legal requirements of Basel II and IFRS.
� Bank Analyzer is an add-on to a Business Information Warehouse (BW).
Integration with Other SAP Modules: BA
SAP BBBBank AAAAnalyzer ensures reporting that is precisely
adapted to the requirements of financial service providers
using all components of Financial Services.
AnalysisTools
FI
CM
TRM
SM
CRM
RBD
SAP BP
LoansManage-ment
� Bank Analyzer is composed of a Financial Database (FDB) and a series of analyzers.
• Financial Database FDB: makes the central databasis available for all analyzers
• Profit Analyzer: supports costing-based profitability analysis
• Balance Analyzer: enables you to create annual financial statements using parallel accounting rules
• Limit Manager: supports the control of counterparty/issuer or country default risk by using limits
• Credit Risk Analyzer: allows you to measure, analyze and control default risks; the analyzer currently
includes the Credit Exposure and Portfolio Credit Risk components.
• Reporting Interface: the central reporting tool is Business Warehouse (BW). It can collect data from
different analyzers for collective reporting.
© SAP AG FS210 1-51
SAP AG 2006
Significance for Loans Management
� Filtering the information from the Loans Management dataset that is required for the respective analysis
� Analysis for determining default risks and market risks
� Analysis for determining the profitabilityof individual bank transactions, products, customers or profit centers
� Analysis for assessing
business opportunities
Integration with Other SAP Modules: SEM
SAP SSSStrategic EEEEnterprise MMMManagement for Banking is a
collective term for a range of tools used for analyzing risks,
opportunities, costs and results.
Analysistools
FI
CM
TRM
SM
CRM
RBD
SAP BP
LoansManage-ment
� SEM Individual Modules
• SAP Profitability for Banking (SEM-PA) supports the bank's profitability analysis. It carries out
calculations for individual transactions based on the mark-to-market value using market rate pricing
for transfer pricing or NPV. Expenses and revenue are assigned to individual transactions and
positions based on cause so that banks can determine the costs for products, customers or profit
center.
• SAP Credit Risk & Limit System for Banking (SEM-CRL) supports banks when controlling default
risks with flexible limit structures that can be updated online. It integrates numerous risk calculation
systems in the limit system and forms an active limit management process.
• SAP Asset Liability Management for Banking (SEM-ALM) supports banks when assessing business
opportunities against the related expenses and risks. Using ALM functions, you can analyze the
effects of interest rate and exchange rate risks and control the revenue for each fiscal period.
• SAP Market Risk for Banking (SEM-MR) provides NPV and value-at-risk analyses that banks use to
evaluate and control market risks based on different simulation scenarios. You can use interest rate,
volatility and currency factors for grid scenarios for option price risks. The market risk solution
offers support for the capital adequacy directive.
© SAP AG FS210 1-52
SAP AG 2006
Integration: Summary
Now you know ...
� The SAP applications and add-ons with which SAP
Loans Management works
� To what extent SAP applications and add-ons use
information from Loans Management for further
processing, and
� Which SAP applications and add-ons handle special
tasks for Loans Management
© SAP AG FS210 1-53
SAP AG 2006
Overview of Loans Management: Summary
You are now able to
� Describe Loans Management in the SAP product
landscape
� Differentiate between product categories and their
special features in Loans Management
� Describe the business process of a loan reflected in
Loans Management, and
� Provide information on which other SAP applications
and add-ons support and enhance the functions of
Loans Management
© SAP AG FS210 1-54
SAP AG 2006
Gloss: Wigbert and the Jungle of Systems
Wigbert Lackmayer was a happy man. As the representative department manager of Statistics for the Wiesburg-
Oldenburg insurance company, he had made his hobby his career: collecting, processing and evaluating data.
Recently, he had been working on the entire history of an insurance customer, to whom the company wanted to
present a gift for 50 years of prosperous cooperation.
Wigbert was ambitious and wanted to make a list of all the customer's insurance companies for the anniversary to prove the close association between the customer and Wiesburg-Oldenburger Insurance beyond the shadow of a
doubt. This was a task that only the computer people could manage, who basically knew everything, just like their machines.
The stage was finally set for the master plan in the canteen. When Wigbert found a seat at his table, Kowalski, a system
programmer, had just sat down with a big plate of tortellini. Wigbert concluded his speech outlinging his plan with the comment, "After all, you guys have everything on
computer." Kowalski chewed, swallowed and spoke, "It's not quite that simple. We have to find the system where the
data is stored." This, however, was no source of concern to Wigbert, who couldn't see that there was any problem.
"Okay, I will tell you how it works," said colleague Kowalski commencing a lengthy explanation. "The very old things may still be in the basement, unless they have been optically archived. Oldenburger Insurance had started to do
that, but stopped shortly after the merger with Wiesburg. We might also have a couple of terabytes in the BS2000 memory. What we can't find there may be on the discs from the MVS mainframes in DB1. It is also possible that some of
that data was converted on the UNIX server. That would be
great, because then we could proceed quickly with SQL flugs. Or perhaps we can simply access it under NT. There
is also the possibility of our OS/2 team finding something. To put it in layman's terms, these things are not always compatible with each other. They are the different systems."
Wigbert was irritated. He always was under the impression
that a computer was a computer. At a totla loss, he went back to his office and did not even hear colleague Kowalski calling after him, "You're lucky that we don't have Macs!"
From SAP INFO – Banks & Insurance Companies 7 03/2003