Unit 1. Overview LM

© 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

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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.

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SAP AG 2006

Overview of LM: Overview Diagram

Course Overview

Overview of Loans Management

New Business

Position Management

Cash FlowDisturbances

Customizing

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SAP AG 2006

Unit 1: Overview of Loans Management

Unit 1Overview of Loans Management

FS210 Loans Management for Financial Services

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SAP AG 2006

Information on 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

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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.

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SAP AG 2006

Information on LM: The Term

CCCCMMMMLLLL

onsumer &ortgageoans

SAP LSAP LSAP LSAP LoansMMMManagement

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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.

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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

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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

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SAP AG 2006

Information on LM: User Basis

Just a few examples . . .

. . . of LM customers worldwide!

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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.

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SAP AG 2006

Processes in Loans Management






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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

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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

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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

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SAP AG 2006


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

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SAP AG 2006


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

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SAP AG 2006


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






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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.

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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 …

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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.

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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


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


Installment loans

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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


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


� 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.


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.

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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


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.

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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


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


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


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


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


� 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


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


� 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






© 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.


� 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


� 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


� 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.


� 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


� 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


� 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


� 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


� 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


� 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

Unit 1. Overview LM

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