T24 Collateral

T3TCO Collateral TEMENOS EDUCATION CENTRE Warning:These training materials are the copyrighted work of Temenos Headquarters SA and other companies in the TEMENOS group of companies (The Copyright Owner). The training materials contain protected logos, graphics and images. Use of the training materials is restricted solely for use by licensed end users, partners and employees. Any un-licensed reproduction by any means, redistribution, editing, transformation, publishing, distribution, or public demonstration of the training materials whether for commercial or personal gain is expressly prohibited by law, and may result in severe civil and criminal penalties. Violators will be prosecuted to the maximum extent possible. Such training materials shall not be represented, extracted into or included in part, or in whole, as part of any other training documentation without the express permission of the Copyright Owner, which must given in writing by an authorised agent of the Copyright Owner to be valid. Where such permission is given a clear and prominent notice must be displayed on any and all documentation accrediting the Copyright Owner with having copyright over the materials. End-user licenses will in no event contain permissions extending the use of these training materials to third parties for commercial training purposes.

Copyright © 2010 Temenos Headquarters SA

Collateral - Objectives



Overview



Linkage of Collateral with static tables



Application specific Parameter tables connected with Collateral



Collateral build sequence



Collateral and Limits



Reports related to Collateral

Collateral – Product Overview Account credit balances Securities LD / MM / Fiduciary Deposits LCs, Guarantees Bills, Cheques

Account overdrafts Loans

Internal to T24 LCs, Guarantees Collateral Type

Collateral All outstanding of a Customer

External to T24

Limits Land, Buildings, Plant & machinery, Art pieces, Stamps Ships, Vehicles, Movable assets

Fixed Limit Variable Limit

Collateral Dependency



Collateral makes use of the following static tables  CUSTOMER  COUNTRY  CURRENCY



Collateral is linked to a Limit record



Collateral could belong to the borrower or to anyone else who offers that as security for borrowing



Owner of collateral, provider of collateral and borrower could be different parties

Application specific Parameters

Collateral - Parameter Tables



Parameter tables to be set-up  COLLATERAL.TYPE  CUSTOMER.COLLATERAL.TYPE  COLLATERAL.CODE  COLLATERAL.PARAMETER

Collateral - Parameter Tables



Parameter tables meant only for collateral types related to Securities module  MARGIN.CONTROL  ASSET.TYPE  SUB.ASSET.TYPE

COLLATERAL.TYPE



COLLATERAL.TYPE file is used to define  Different broad types of collateral  Valuation and revaluation rules  Linkage to other T24 applications



Upto 999 collateral types can be defined

COLLATERAL.TYPE



APPLICATION.INPUT  Mandatory, Optional or None M when collateral of this type is always linked to an internal application Deposit, Account balances, Customer portfolio held with bank Applications from where value could be obtained should also be indicated O when it is optional Collateral values could be available within T24 or outside Deposit, which could be our bank deposit or external bank deposit Applications from where value could be obtained should also be indicated N when the collateral is always an external object

COLLATERAL.TYPE



Value types  NOMINAL.VALUE Face value/current market value  EXECUTION.VALUE Expected worth in case of sale  THIRD.PARTY.VALUE Outside indebtedness on collateral  GEN.LEDGER.VALUE Amount to be recorded in General Ledger  CENTRAL.BANK.VALUE Any specific limitation on values set by Central Bank



Choices available  M, O, N, n%N, n%E, F, FM (Fed / Margin for Securities application)

COLLATERAL.TYPE



APPLICATION  Mandatory or Optional choices to be detailed as to which applications would give values AC, BL, CQ, FD, LCE, LCI, LD, MD, MM, SC One or more applications can be chosen



ONLINE.UPDATE  Possible for collaterals where execution value is fed by the system  COLLATERAL.PARAMETER and Limit records are also to be marked as Y for on line updates  Collateral value is changed whenever Limit is drawn



Revaluation  When Nominal or Execution values are not fed by system, possible to revalue at any chosen percentage and at any desired frequency

COLLATERAL.TYPE



Asset Types  When a portfolio is offered as collateral, it is possible to pick out the required Asset and/or Sub Asset types defined here alone out of the portfolio and to apply the collateral value after ascertaining the margin Fully paid shares with 70% margin  In MARGIN.CONTROL file , we can specify rates to assign a margin rate to a particular asset If 70% margin indicated, collateral value would be considered as 70%  In ASSET.TYPE file, we can define and group the different investments – in Securities as well as other modules, if needed Equities, Bonds  SUB.ASSET.TYPE file contains a further definition of an asset Partly paid shares, fully paid shares

Workshop - 1



Use Admin Menu > Framework Parameter > Collateral > Collateral

Type  Create COLLATERAL.TYPE records for An item held outside T24 – say Paintings An item held within T24 – say Cash collateral Get the record authorised



Use Command Line  Open Collateral type Cash collateral  Opt for online update of balance for Cash collateral

Workshop – 1 Solution

Workshop – 1 Solution

COLLATERAL.CODE



Used to define  Sub classification of Collateral types Which Collateral codes could be grouped under a collateral type for reporting purposes  Default frequencies for recalculation of percentage of cover and review of Collateral rights held under this code When Customers offer Collateral to cover various assistances, it is possible to do percentage allocation and work out a percentage cover We can set frequency for working out this cover from time to time for information  In both these cases, system prompts through reports



Upto 999 Collateral codes can be defined  Though the Ids of Collateral codes and types need not match, user can opt for meaningful groupings

Workshop - 2



Use Admin Menu > Framework Parameter > Collateral > Collateral

Code  Create records for the following codes PICASSO PAINTINGS ACCOUNT BALANCES 

Link the COLLATERAL.TYPE records earlier created by you

 Get the records authorised

Workshop – 2 Solution

COLLATERAL.PARAMETER



Optional parameter table. Mainly used to define system default information and choices not available elsewhere



REVALUATION.INFO Field to indicate how many previous revaluation information to be held in history



For any select lines of General Ledger reports, it is possible to reallocate the outstanding in terms of underlying collateral values like Loans secured by property etc by using COLLATERAL.ALLOCATION application.  STAT.REP.LINE.DESC Field here is used to indicate choice regarding reporting line description in COLLATERAL.ALLOCATION application  1 = Reporting value 2 = Nominal and Third party value  3 = Execution and Third party value  When no choice is made, there would be no descriptive enrichment

COLLATERAL.PARAMETER



DEFAULT.ADDRESS Field to indicate collateral types for which address of Customer could be defaulted from CUSTOMER  Ideal for collaterals like residential flats where address of Customer could be defaulted as address of collateral



End users need to create records in COLLATERAL.RIGHT and COLLATERAL applications to record details of collaterals taken.  COLLATERAL.LINK Field could be set as 1st or All or None to indicate whether T24 should automatically take a user to COLLATERAL application once COLLATERAL.RIGHT has been set up



RETENTION.PERIOD Field to indicate the period for liquidated collateral records to remain in live file

COLLATERAL.PARAMETER



For internally held collaterals, it is possible to opt for updating values online by choosing Y in ONLINE.UPDATE Field  If similar choice is indicated in COLLATERAL.TYPE and LIMIT also, then online update of collateral value done when Limit is affected



When Currency conversion risk factor in respect of collaterals is desired to be covered in cases where collateral value is in currencies different from the limit currency then COLLATERAL.CCY and FX.RISK.MARGIN Fields can be used to define the desired margin for a chosen currency



When many collaterals are meant to cover many assistances, T24 can set an order of priority for these allocations in LIMIT.COL.ALLOC.WORK table.  If it is desired to manually change this order, then ORDER.PRIORITY Field should be set as MANUAL

COLLATERAL.PARAMETER



A Limit could be fully secured by collaterals or partly secured.  When partly secured, there could be maximum amounts of unsecured and secured portions, which add up to maximum total. Maximum secured could be stipulated for each collateral code covering a limit, while other two would be common for a limit.



Should unsecured portion of a limit be considered first before allocating a collateral value for the secured portion?  COVER.UNSEC.1ST Field offers two choices When set to Y, collateral value allocated after unsecured portion is utilised When set to N, secured portion is first used and hence allocation is done first

CUSTOMER.COLLATERAL.TYPE

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It is possible to set Customer level rules for calculating execution value of any particular COLLATERAL.TYPE to be used in preference to the normal rules applicable



The Id is Customer ID-COLLATERAL.TYPE Id  CCCCC-900

Quiz 1

1) How are different collateral codes linked to different collateral types? Is there any linkage through Ids? Ans: The Ids have no linkage. For better implementation, it is advisable to give Ids of types as 100, 200,300 etc and the codes under them as 101, 102, 201, 202 etc. 2) Out of the following applications, which cannot be used as valid input in APPLICATION.INPUT Field of COLLATERAL.TYPE for an internal collateral object - AC, BL, FX, MG, LD, MD, MM, SC ? Ans: FX and MG cannot be used

3) Nominal Value of Collateral is $ 80,000, Execution Value is 90%N and Third party value is $20,000. What is the amount that would be taken as collateral value for limit purposes? Ans: $ 52,000

Quiz 1

4) Building with nominal value of $ 80,000 was offered as collateral. How can we get on line update of this collateral? Ans: As it is likely to be treated as external object, we cannot get on line update 5) Execution Value for Collateral type 100 is 100%N. For Customer100120, how can the user set it at 75%N? Ans: CUSTOMER.COLLATERAL.TYPE

Collateral Build Sequence

1. MARGIN.CONTROL

*

Mandatory Optional

2. ASSET.TYPE

* ASSET.TYPE 3. SUB.ASSET.TYPE

MARGIN.CONTROL

4. COLLATERAL.TYPE *

5. COLLATERAL.CODE *

* COLLATERAL.TYPE

6. COLLATERAL.PARAMETER

7. CUSTOMER.COLLATERAL.TYPE

* COLLATERAL.TYPE

Collateral – Product features

Collateral – Operational Level



To establish collateral records for customers, two applications are used  COLLATERAL.RIGHT first and  COLLATERAL thereafter



The link between them is the Id of each file  Id of COLLATERAL.RIGHT is CCCCCC.SS  Id of COLLATERAL will be CCCCCC.SS.NNNN

COLLATERAL.RIGHT



Used to indicate  Customer offering collateral  Collateral Code for this collateral  Which liabilities are proposed to be covered Company wise, Contract / Account wise, or Limit wise or Customer wise What percentage of the collateral value is meant for such coverage  Percentage of cover belonging to a collateral  Validity from to dates and review frequency  Owner of the Collateral



A customer may create upto 99 rights

Workshop - 3



Use User Menu > Customer > Individual Customer  Open a Customer record for Individual Customer and get the record authorised



Use User Menu > Retail Operations > Account > Open

Current Account  Open a current account in USD for the customer and get the record authorised



Use User Menu > Risk Management > Collateral > Collateral Link  Create a COLLATERAL.RIGHT for your individual customer with collateral code created by you earlier for Picasso painting  This is valid for one year from today  40% value is meant for overdraft of another customer while 60% value is meant for overdraft of your customer  Commit the record, accept overrides, if any

Workshop – 3 Solution

Workshop – 3 Solution

Workshop – 3 Solution

COLLATERAL



This application is used to record details of submitted collateral  Collateral type and its code  Further detailed description if needed  Contract or Account Id by which the Collateral is represented when the Collateral is internally held Deposit number or Account number with credit balance



A customer may offer upto 9999 collaterals for every collateral right

COLLATERAL



Values of collaterals are held here  Input allowed as per rules set up in COLLATERAL.TYPE record  In addition, MAXIMUM.VALUE Field could be used if the execution value of the item is of a variable nature but is only pledged up to a certain amount It represents the maximum pledged value of the item Execution value will never exceed this maximum value, if entered



Relevant dates  Value date, expiry and review date with frequency A collateral can be offered with a future value date Status is shown as FWD till value date is reached

Workshop - 4



Use User Menu > Risk Management > Collateral > Collateral  Establish a collateral item for individual customer based on COLLATERAL.RIGHT created in Workshop 3  Give a nominal value of USD 1 Million  Security is available from today and is valid for 3 years thereafter  Value is subject to review every year on the anniversary date  Accept overrides, if any

Workshop – 4 Solution

Limit and Collateral

Internal Deposit

External

Portfolio

Property

Margin

Collateral Value

Collateral Code

Collateral Value

F I X E D

Collateral Value

V A R Collateral Right (Legal Right) I A Limit (Credit Line) B L E

Loan / Drawing

Limit and Collateral



A Limit could be  Fully secured by one or more Collaterals  Partly secured by one or more Collaterals and partly unsecured  Completely unsecured



Limit can be either Fixed or Variable  Fixed Limits - Available amount remains fixed at the pre-agreed amount  Variable Limits - Available amount varies depending on the value of supporting collateral If value of collateral decreases the amount of Limit available for use will also decrease If value of collateral increases, amount of Limit available also increases – upto the pre-agreed Limit amount

Limit and Collateral



In the case of fixed limits, we can indicate the minimum value of Collateral requirement for any given Collateral Code  Collateral required could be expressed as an amount or as percentage



It is also possible to indicate different Collateral required amounts or percentages for different periods. It could be increasing or decreasing or mixed  Collateral required is USD 90,000 for first six months, USD 75,000 for the next twelve months and USD 25,000 thereafter  Collateral required is USD 90,000 for first six months, USD 125,000 for the next twelve months and USD 200,000 thereafter  Collateral required is USD 90,000 for first six months, USD 80,000 for the next twelve months and USD 100,000 thereafter

Limit and Collateral

COLLATERAL.TYPE LIMIT

Fixed Limit

Variable Limit

COLLATERAL.CODE

COLLATERAL.RIGHT

COLLATERAL

Workshop - 5



USE Command Line  Establish a Limit of USD 1Million for the individual customer opened in earlier workshop to allow overdrafts (advances) in Current Account valid for one year  Make this Limit as Fixed and secured by Picasso Paintings  Minimum value of Collateral to be USD 100 thousand  For the first 6 months, Collateral value to be at least USD 500 thousand  Maximum secured amount under this Collateral code is USD 700 thousand



Get the Limit Record authorised



Use User Menu > Risk Management> Collateral > Main Collateral

Enquiry  View Limit /Collateral Summary

Workshop – 5 Solution

Workshop – 5 Solution

Workshop - 6



Use User Menu > Risk Management > Collateral > Collateral Link  Create a new COLLATERAL.RIGHT for your individual customer, for the Picasso paintings covering the Limit created in previous workshop



Use User Menu > Credit Operations > Collateral > Collateral  Create a Collateral record for value of USD 400 thousand



Use Command Line  Look back at your Limit record for the effect of Collateral created



Use User Menu > Credit Operations > Collateral > Main Collateral

Enquiry  Look at the Limit / Collateral Summary  Drill down the Limit / Collateral Summary and look at the Collateral Right Detail  Further drill down and look at the Collateral Details

Workshop – 6 Solution

Workshop – 6 Solution

Workshop – 6 Solution

Workshop - 7



Use User Menu > Risk Management > Limits > Limit Menu > Create

Secured Limit  Establish a Limit of USD 1Million for the individual customer, to allow overdrafts in current account valid for one year  Limit is Variable and secured by Cash Collateral  Maximum secured amount under Cash Collateral is USD 500 thousand  Balance to be unsecured  Get the record authorised



Use User Menu > Risk Management> Collateral > Main Collateral

Enquiry  Look at the Limit / Collateral Summary. Note how much of the limit is now available

Workshop – 7 Solution

Workshop – 7 Solution

Workshop - 8



Use User Menu > Risk Management > Collateral > Collateral Link  Create a new right for your individual customer for Cash Collateral  Allocate 70% to the limit created in previous workshop and 30% to another Account Limit of a different customer



Use User Menu > Risk Management > Collateral > Collateral  Create a collateral attaching a current account with credit balance



Use User Menu > Risk Management > Collateral > Main Collateral

Enquiry  Look at the Limit / Collateral Summary and note the limit now available  Drill down the Limit / Collateral Summary and look at the Collateral Right Detail  Further drill down and look at collateral details

Workshop – 8 Solution

Workshop – 8 Solution

Allocation of Collateral to Limits



When a limit is covered by more than one collateral right without assigning specific percentage cover, a numeric priority for allocation is done by T24



Rights which cover only a single limit are assigned a higher priority, than those covering multiple limits



For each limit, priorities assigned to covering rights and the amounts of allocation are maintained in LIMIT.COL.ALLOC.WORK table  If these are to be manually modified by users, then ORDER.PRIORITY Field in COLLATERAL.PARAMETER should have been set as “MANUAL”

Allocation of Collateral to Limits Collateral rights and Limits attached to them Collateral Right 1021.1

Collateral amount 5,000,000

1021.2

3,000,000

Total

8,000,000

Attached Limit

Limit amount

1021.2010.01 *

4,000,000 *

1021.2050.01

4,000,000

1021.2010.01 *

4,000,000 * 8,000,000

Allocation of Collateral values to Limits by T24 Collateral Right

Attached Limit

1021.2

1021.2010.01 *

3,000,000

}

1021.1

1021.2010.01 *

1,000,000

}

1021.2050.01

4,000,000

4,000,000

8,000,000

8,000,000

Total

Collateral amount allocated

Online Limit

4,000,000 *

Workshop - 9



Use User Menu > Customer > Individual Customer  Create a new record for a customer and get the record authorised



Use User Menu > Risk Management > Limits > Limit Menu > Create

Secured Limit  Create two variable limits for this customer with internal amount of USD 3,000,000 and USD 6,000,000  Get the records authorised

Workshop – 9 Solution

Workshop – 9 Solution

Workshop – 9 Solution

Workshop - 10



Use User Menu > Risk Management> Collateral > Collateral Link  Create two new rights for your customer  Attach the first right to both the limits created in previous workshop  Attach the second right only to the first limit created in previous workshop



Use User Menu > Risk Management > Collateral > Collateral  Create a collateral record for the first right  Create a collateral record for the second right  For both, under Application ref. field, give a suitable Deposit Id from LD

Workshop – 10 Solution

Workshop – 10 Solution

Workshop - 11



Use Command Line  Check the LIMIT.COL.ALLOC.WORK and the limits for allocation of collateral amounts to limits created in previous workshop  Look at the two variable limit records for allocation of collateral amounts

Workshop – 11 Solution

Allocation of Collateral - Unsecured Portion



Collateral values would be allocated to Limits subject to the maximum amount specified record in the field MAXIMUM.SECURED for the collateral code in the LIMIT record



If maximum secured amount is not specified for a collateral code, allocation would be upto the value of MAXIMUM.TOTAL Field of the Limit, which includes unsecured portion as well  If COVER.UNSEC.1ST Field of COLLATERAL.PARAMETER is set to Y, Collateral value would be allocated to cover only the secured portion  Limit utilisation allowed to cover the unsecured portion first even if collateral is not available to cover secured portion in the meanwhile

Workshop - 12



Use User Menu > Customer > Individual Customer  Open a record for an individual customer and get the record authorised



Use User Menu > Risk Management > Limits > Limit Menu > Create

Secured Limit  For the above customer, create two limits for 2 different loan sub-products 1. A variable Limit with Internal amount of USD 5 million and Maximum unsecured amount of USD 3 million 2. A variable Limit with Internal Amount of USD 3 million



Use User Menu > Risk Management > Collateral > Collateral Link  Create a right for the customer to cover all liabilities



Use User Menu > Risk Management > Collateral > Collateral  Create a Collateral for the above right

Workshop – 12 Solution

Workshop – 12 Solution

Workshop – 12 Solution

Workshop - 13



Use Command Line  Check the two Limits and verify the Collateral allocation and online Limits

Workshop – 13 Solution

Variable third party pledges



Customers may like to pledge their assets held in their portfolio in favour of other customers.  Each pledge may have different priority and for different amounts to different customers



CUSTOMER.PLEDGE application used to record details of pledge recipient, priority of allocation and maximum pledge amount  T24 allocates pledged assets of the main customer to recipient customers, based on total liabilities of recipients, in the sequence of priorities allocated.  Allocations are made after taking care of liabilities of main customer offering the pledge  Priorities cannot be duplicated

Variable third party pledges



T24 maintains CUSTOMER.PLEDGE.GROUP table based on CUSTOMER. PLEDGE record  Shows the main customer offering pledge and the recipient customers and the priority allocated by the main customer to the recipient customer



Assets and liabilities of customers involved in CUSTOMER.PLEDGE are processed during batch run and SC.POS.ASSET record is generated



Based on SC.POS.ASSET, allocation is distributed and shown in CUST.COLLATERAL.ALLOCATION  Liability of a customer will be covered first with his assets and balance amount allocated to different customers indicated in CUSTOMER.PLEDGE.GROUP in the order of priority

Collateral Reports



Collateral inventory  Inventory by collateral type



Collateral review  Review dates for collateral items



Collateral expiry  Items approaching expiry dates



Collateral expired  Items past expiry date



Collateral right review  Rights nearing review date



Collateral right expiry  Rights nearing expiry date



Collateral right expired  Expired rights

System maintained Tables



A Collateral right covers a specific assistance in the form of loans, over drawn accounts, or a limit or all assistance to a Customer.  Correspondingly, T24 maintains assistance wise collateral rights  LD.COLLATERAL.RIGHT holds details of rights that cover a given LD  Other similar internal files are LI.COLLATERAL.RIGHT, AC.COLLATERAL.RIGHT, BL.COLLATERAL.RIGHT, FD.COLLATERAL.RIGHT, FX.COLLATERAL.RIGHT etc



A Collateral gets value from an internal application in the form of deposits, credit balances in accounts or guarantees  Correspondingly, T24 maintains application wise collaterals  LD.COLLATERAL holds details of Deposits that provide value for a collateral  Other similar internal files are AC.COLLATERAL, BL.COLLATERAL, MM.COLLATERAL, LC.COLLATERAL etc

Collateral Dependency Diagram CUSTOMER

COLLATERAL

COUNTRY CURRENCY Limit, Account, T24 applications

Loan, LC, Guarantee

for internally held items ACCOUNT, Securities LD / MM / Fiduciary Deposits LCs, MD Guarantees Bills, Cheques

LI.COLLATERAL.RIGHT, AC.COLLATERAL, AC.COLLATERAL.RIGHT,

BL.COLLATERAL, BL.COLLATERAL.RIGHT FX.COLLATERAL.RIGHT LC.COLLATERAL, LC.COLLATERAL.RIGHT

COLLATERAL.TYPE

COLLATERAL.CODE

LD.COLLATERAL, LD.COLLATERAL.RIGHT MG.COLLATERAL.RIGHT SC.COLLATERAL, SC.COLLATERAL.RIGHT etc

COLLATERAL.PARAMETER

Summary



You have learnt about  Linkage of collateral with static tables  Parameter tables connected with collateral  Important features of Collateral including fixed and variable limits  Enquiries and reports related to Collateral

Thank You TEMENOS EDUCATION CENTRE Warning:These training materials are the copyrighted work of Temenos Headquarters SA and other companies in the TEMENOS group of companies (The Copyright Owner). The training materials contain protected logos, graphics and images. Use of the training materials is restricted solely for use by licensed end users, partners and employees. Any un-licensed reproduction by any means, redistribution, editing, transformation, publishing, distribution, or public demonstration of the training materials whether for commercial or personal gain is expressly prohibited by law, and may result in severe civil and criminal penalties. Violators will be prosecuted to the maximum extent possible. Such training materials shall not be represented, extracted into or included in part, or in whole, as part of any other training documentation without the express permission of the Copyright Owner, which must given in writing by an authorised agent of the Copyright Owner to be valid. Where such permission is given a clear and prominent notice must be displayed on any and all documentation accrediting the Copyright Owner with having copyright over the materials. End-user licenses will in no event contain permissions extending the use of these training materials to third parties for commercial training purposes.

Copyright © 2010 Temenos Headquarters SA