Defining Credit Facilities for Basel II Compliance

Use the following pages to define credit exposures and their associated products and customers. Credit facilities are a primary source of input for the Basel II credit risk engine.

Pages Used to Define Credit Facilities

Page Name	Definition Name	Navigation	Usage
Credit Facility	FI_CREDIT_FACILITY	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Credit Facility, then select Credit Facility	Define a credit facility or exposure.
Limits and Sub Limits	FI_FAC_SUB_LIMITS	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Credit Facility, then select Limits and Sub Limits	Define credit limits, sub-limits and sub-sub-limit amounts associated with a facility. Sub-limits follow a hierarchical setup pattern and are an optional setup component.
Sub Products and Customers	FI_FAC_SUB_PC	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Credit Facility, then select Sub Products and Customers	Define all products and customers associated with a sub-facility.
Sub-Sub Limits	FI_FAC_SSUB_LIMITS	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Credit Facility, then select SubSub Limits	Define the sub-sub-limit amounts for the facility. A sub-sub-limit is the lowest level in the credit limit hierarchy and is optional.
SubSub Products and Customers	FI_FAC_SSUB_PC	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Credit Facility, then select SubSub Products and Customers	Define the combination of products and customers associated with the sub-sub-limit amount.
Notes	FI_CR_FAC_NOTES	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Credit Facility Select the Notes tab.	Enter miscellaneous text concerning the facility.
Counterparty	FI_CNTRPRTY_TBL	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Counterparty	Define the participants in a contractual financial relationship with the institution. The primary setup key is based on the general warehouse customer ID, but definition as a counterparty for Basel II purposes enables you to track additional attributes, such as risk rating.
Collateral Code	FI_COLLATERAL_TBL	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Collateral Code	Define attributes of credit risk mitigants, such as financial or physical collateral or guarantees.
Collateral	FI_COLLATERAL	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Collateral	Define attributes of a piece of collateral.
Collateral Amts	FI_COLLATERAL_AMTS	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Collateral, then select Collateral Amts	Define amounts associated with collateral, such as recovery value.
Notes	FI_COLLATRL_NOTES	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Collateral, then select Notes	Enter miscellaneous text concerning the collateral.
Customer Group	FI_CUSTOMER_GROUP	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Customer Group	Define the counterparties or customers who are part of a customer group.
Product Group	FI_PRODUCT_GROUP	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Product Group	Define a list of products associated with a credit facility product group.
Risk Rating	FI_RISK_RATING	select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Risk Rating	Define the risk rating, rating scope, and probability of default that can be associated with a counterparty or customer.

Credit Facility Page

Use the Credit Facility page (FI_CREDIT_FACILITY) to define a credit facility or exposure.

Navigation

select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Credit Facility, then select Credit Facility

Image: Credit Facility page

This example illustrates the fields and controls on the Credit Facility page. You can find definitions for the fields and controls later on this page.

Business Unit

The business unit with which the exposure is associated.

Facility ID

User-defined unique identifier for the credit facility.

As of Date

Enter the date that the facility information was last updated.

Status

Select Active orInactive.

Description

Enter a short description of the facility.

Co-Borrower Count

Enter the total number of customers who have transactions (draws) against the credit facility. This field is informational and optional.

Facility Start Date andFacility Maturity Date

Specify the initial date that the credit facility becomes available, and the date that it matures or resets (in the case of a revolving facility).

Remaining Term (Years)

Enter the remaining term (number of years) left to maturity for the credit facility.

Draw End Date

Enter the draw down date.

This is the last date that a credit draw down can be carried out.

Facility Class

Select from the available options to describe the counterparty: Bank, Central Bank, Corporate, Individual, Multiple Development Bank, Public Sector Entity, Security Firm, orSovereign.

Facility Type

Select the facility type from the available options: Non-Revolving, Revolving, orTranche.

Facility Purpose

Select the intended use or specialized category of the credit exposure from the available options, as defined by Basel II: Corp Commodities Finance, Corp High Volatility Comm RE, Corp Income Producing RE, Corp Object Finance, Corp Project Finance, Corp Purchased Receivables, Equities — Zero RWA, Equity — Grandfathered, Equity — Legislative, Equity — Publicly Traded, General, Other Special Lending,Retail Others, Retail Purchased Receivables, Retail Residential Secured, Retail Revolving, Securities — Investors, Securities — Originated, Short Term Self Liquid LC, Trading Book OTC, orTrading Book Repo.

Senior Level

Select the exposure's seniority level: Senior, Subordinated, orUnsecured.

Facility Attributes

Committed Facility

Select if this facility is committed.

Facility in Default

Select if this facility is in default.

Facility Secured

Select if this facility is secured by physical or financial collateral.

Limits and Sub Limits Page

Use the Limits and Sub Limits page (FI_FAC_SUB_LIMITS) to define credit limits, sub-limits and sub-sub-limit amounts associated with a facility.

Sub-limits follow a hierarchical setup pattern and are an optional setup component.

Navigation

select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Credit Facility, then select Limits and Sub Limits

Image: Limits and Sub Limits page

This example illustrates the fields and controls on the Limits and Sub Limits page. You can find definitions for the fields and controls later on this page.

Commit Amount, Currency Code, andCommit Amount BCE (base currency equivalent)

Enter the total facility commitment amount in the currency in which it is denominated, and the base currency equivalent amount.

Product Group

Select one of the product groups that you previously defined on the Product Group page. This field defines the list of product IDs that can be drawn against this credit facility. The list may be further qualified by a list of products associated with a lower level limit.

Customer Group

Select one of the customer groups that you previously defined on the Customer Group page. This field defines the list of customers who can draw against this credit facility. The list may be further qualified by a list of customers specifically associated with a lower level limit.

Exposure Haircut

Enter the percent margin applied to the commitment amount to reflect the net exposure risk after adjusting for volatility factors. For example, if haircut processing is enabled, a 1,000,000 USD facility with a defined haircut of 10 results in a 1,100,000 USD exposure.

Sub Facility Limits

Sub Facility ID

Use the rows to enter each sub-facility that falls under the total facility. A sub-facility is a lower level credit limit that applies to a subset of products and customers.

Limit Amount andLimit Amount BCE (base currency equivalent)

For each sub-facility, enter the currency in which it is denominated and the base currency equivalent amounts. The limit amounts defined for a credit facility are not necessarily additive—that is, the total of the sub-limits does not have to equal the overall facility commitment amount. The limit amount is a high-water mark for the customers and products defined for that limit. Each sub-limit is independent of the other.

Sub Products and Customers

Click the link to access the Sub Products and Customers page, where you can define the products and customers associated with each sub-facility. The list of sub-products and customers associated with a sub-facility define all possible combinations. For example, if product 1, product 2, and product 3 are defined in the same sub-limit level with customer 1 and customer 2, the processing logic assumes that customer 2 can draw against the facility using any of the three products, up to the total of the sub-limit amount.

SubSub Limits

Click the link to access the SubSub Limits page, where you can define the sub-sub-facilities under each sub-facility, and the associated limits, products and customers. A sub-sub-limit further qualifies a sub-limit and acts in a hierarchical manner—that is, products and customers associated with a sub-sub limit amount must exist somewhere in a limit level above it (sub-limit or facility commitment amount).

Sub Products and Customers Page

Use the Sub Products and Customers page (FI_FAC_SUB_PC) to define all products and customers associated with a sub-facility.

Navigation

select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Credit Facility, then select Sub Products and Customers

Image: Sub Products and Customers page

This example illustrates the fields and controls on the Sub Products and Customers page. You can find definitions for the fields and controls later on this page.

The list of sub-products and customers associated with a sub-facility define all possible combinations of product and customers associated with a sub-facility limit amount. For example, if product 1, product 2, and product 3 are defined in the same sub-limit level with customer 1 and customer 2, the processing logic assumes that customer 2 can draw against the facility using any of the three products, up to the total of the sub-limit amount.

Product ID

Enter each product associated with the sub-facility by selecting one of the products that you defined on the Product Group page.

Customer ID

Enter each customer associated with the sub-facility by selecting one of the customers that you defined on the Customer Group page.

Limits and Sub Limits

Click the link to access the Limits and Sub Limits page, where you can define the limit for the sub-facility.

Sub Sub Limits Page

Use the Sub Sub Limits page (FI_FAC_SSUB_LIMITS) to define the sub-sub-limit amounts for the facility.

A sub-sub-limit is the lowest level in the credit limit hierarchy and is optional.

Navigation

select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Credit Facility, then select Sub Sub Limits

Image: Sub Sub Limits page

This example illustrates the fields and controls on the Sub Sub Limits page. You can find definitions for the fields and controls later on this page.

Define the facility credit limits for product and customer combinations. Sub-facilities are not valid for retail credit facilities.

Warning! When a facility purpose is changed to Retail, the system automatically deletes all sub-facility setup data.

For each customer ID and product ID that is associated with the non-retail facility, complete the following fields.

Sub Sub Facility ID

Enter each Sub Sub Facility ID that falls under the sub-facility. A sub-sub-facility further qualifies a sub-limit in a hierarchical manner. This field is optional.

Limit Amount andLimit Amount BCE (base currency equivalent)

Enter the limit for each sub-sub-facility in the currency in which it is denominated and in base currency equivalent amounts. Draws against product and customer combinations associated with a sub-sub-limit are assumed not to exceed the limit amount at that level.

SubSub Products and Customers

Click the link to access the SubSub Products and Customers page, where you can define the products and customers that are associated with the sub-sub-facility.

Sub Sub Products and Customers Page

Use the Sub Sub Products and Customers page (FI_FAC_SSUB_PC) to define the combination of products and customers associated with the sub-sub-limit amount.

Navigation

select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Credit Facility, then select Sub Sub Products and Customers

Image: Sub Sub Products and Customers page

This example illustrates the fields and controls on the Sub Sub Products and Customers page. You can find definitions for the fields and controls later on this page.

For each sub-sub-facility, identify the products and customers that are associated with it. Click the Limits and Sub Limits link to access the Limits and Sub Limits page, where you can view and define the limits for the total facility and each sub-facility.

Counterparty Page

Use the Counterparty page (FI_CNTRPRTY_TBL) to define the participants in a contractual financial relationship with the institution.

The primary setup key is based on the general warehouse customer ID, but definition as a counterparty for Basel II purposes enables you to track additional attributes, such as risk rating.

Navigation

select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Counterparty

Image: Counterparty page

This example illustrates the fields and controls on the Counterparty page. You can find definitions for the fields and controls later on this page.

Define the participants (or counterparties) in a financial contract with the institution. The counterparties are the financial institution's customers. The counterparty attributes that you define here provide some of the key parameters for Basel II processing.

Counterparty Type

Select the counterparty's business entity type from the available options: Bank, Central Bank, Corporate, Individual, Multiple Development Bank, Public Sector Entity, Security Firm, orSovereign.

Currency Code andBase Currency

Enter the currency code of the credit limit and the base currency in which the customer transacts business.

Credit Limit andCredit Limit in BCE (base currency equivalent)

Enter the credit limit, if any. In addition to facility limits, you can use the credit limit as an additional limit setting for reporting purposes; however, it is not currently used for Basel II processing. The credit risk engine uses the facility level limits and sub-limits.

Risk Rating

Select one of the predefined risk ratings for the counterparty.

Rating Scope

Define the scope that is associated with the risk rating. Scope further defines logical differentiation of the rating's intended use, such as applying different default probability or risk weights for different exposure categories. For example, a risk rating of AAA can be applied to counterparties with different characteristics. A counterparty with a rating ofAAA and a customer scope ofSovereign might be assigned a different probability of default than a customer with a rating ofAAA and a scope ofCorporate.

Rating Basis ID

Enter an identifier to cross-reference documents or database records that store the justification or evaluation that lead to the rating assignment. This is an optional field that the credit risk engine does not currently use.

Credit Score

Enter the internal credit score of the counterparty. This is an optional field that the credit risk engine does not currently use.

Core Market Participant

Select if Basel II criteria define this counterparty as a core market participant.

Collateral Code Page

Use the Collateral Code page (FI_COLLATERAL_TBL) to define attributes of credit risk mitigants, such as financial or physical collateral or guarantees.

Navigation

select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Collateral Code

Image: Collateral Code page

This example illustrates the fields and controls on the Collateral Code page. You can find definitions for the fields and controls later on this page.

Define collateral codes for Basel II processing requirements.

Collateral Page

Use the Collateral page (FI_COLLATERAL) to define attributes of a piece of collateral.

Navigation

select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Collateral

Image: Collateral page

This example illustrates the fields and controls on the Collateral page. You can find definitions for the fields and controls later on this page.

Define the parameters that are associated with a piece of collateral.

Currency Code

Specify the currency in which the collateral is denominated.

Collateral Type

Select the collateral type from the available options: Cash, Commercial Real Estate,Credit Derivative, Debt Security, Equity, Gold, Guarantee, Mutual Fund, Residential Real Estate, Receivables, orOther.

Facility ID

Enter the predefined facility with which the collateral is associated. This field works in conjunction with Collateral Link to define the collateral amount that offsets exposure on a particular credit facility.

Collateral Code

Enter the predefined collateral code to categorize a piece of collateral for bank-specific Basel II processing requirements. It is an informational attribute that does not trigger the credit risk engine's processing logic.

Collateral Location

Enter the country in which the collateral resides. This is an optional field.

Customer Group

Select the customer group that is associated with this collateral. You defined the customer groups on the Customer Group page. This field works in conjunction with the Collateral Link field to define the collateral amount as offsetting facility exposures that are associated with an entire customer group. The credit risk engine uses this information to allocate the collateral across multiple facilities until it has been fully assigned.

Collateral Maturity

Enter the financial collateral's maturity date, if any.

Guarantor ID

Select the predefined counterparty or customer that is associated with a guarantee or credit derivative. In certain processing scenarios, the risk weight of the guarantor is swapped with the risk weight of the obligor.

Rating Scope

Select the guarantor's risk rating, which you predefined on the Risk Rating page.

Eligible Collateral

This field defines the Basel II methodology for which the collateral is considered eligible. Select from the available options: Advanced, Comp/Foundation/Advanced, Comprehensive, Comprehensive/Advanced, Comprehensive/Foundation, Foundation, Foundation/Advanced, None, Simple, Simple/Advanced, Simple/Comp/Advanced, Simple/Comp/Foundation, Simple/Comp/Foundation/Adv, Simple/Comprehensive, Simple/Foundation, orSimple/Foundation/Advanced.

Valuation Date

Enter the valuation date of the collateral. This field is informational and not used in processing.

Collateral Link

Define whether the collateral is linked to: Customer Collateral, Facility Collateral, orGroup Collateral.

Customer level collateral processing is not enabled.

Collateral Haircut

Enter the percent margin that is applied to the collateral for the volatility risk. For example, if haircut processing is enabled, a 1,000,000 USD piece of collateral with a defined collateral haircut of 10 results in a 900,000 USD risk mitigation.

Collateral Amts Page

Use the Collateral Amts page (FI_COLLATERAL_AMTS) to define amounts associated with collateral, such as recovery value.

Navigation

select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Collateral, then select Collateral Amts

Image: Collateral Amts

This example illustrates the fields and controls on the Collateral Amts. You can find definitions for the fields and controls later on this page.

Collateral Amount

Enter the nominal value of the collateral in the denominated currency.

Collateral BCE (base currency equivalent) andBase Currency

Enter the collateral amount in the base currency equivalent.

Market Price andMarket Price BCE (base currency equivalent)

Enter the open market value for the collateral and the market price restated in the base currency equivalent.

Recovery Value

Enter the value of the collateral net of haircuts that could be realized to satisfy the requirements of the collateralized exposure.

Valuation Frequency

Enter the collateral valuation frequency.

Replacement Cost andReplacement BCE (base currency equivalent)

Enter the replacement cost of the collateral in the denominated currency and its base currency equivalent.

Remargining Freq

Enter the frequency of margin adjustments for the security.

This value generally pertains to capital markets instruments.

Customer Group Page

Use the Customer Group page (FI_CUSTOMER_GROUP) to define the counterparties or customers who are part of a customer group.

Navigation

select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Customer Group

Image: Customer Group page

This example illustrates the fields and controls on the Customer Group page. You can find definitions for the fields and controls later on this page.

Define the customers or counterparties that constitute a customer group. Customer groups are an integral part of defining credit facilities and customer group level collateral.

Product Group Page

Use the Product Group page (FI_PRODUCT_GROUP) to define a list of products associated with a credit facility product group.

Navigation

select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Product Group

Image: Product Group page

This example illustrates the fields and controls on the Product Group page. You can find definitions for the fields and controls later on this page.

Define the products that constitute a product group. Product groups are an integral part of facility level credit risk processing.

Risk Rating Page

Use the Risk Rating page (FI_RISK_RATING) to define the risk rating, rating scope, and probability of default that can be associated with a counterparty or customer.

Navigation

select Financial Services Industries, then select Risk-Weighted Capital Rules, then select Credit Risk, then select Risk Rating

Image: Risk Rating page

This example illustrates the fields and controls on the Risk Rating page. You can find definitions for the fields and controls later on this page.

Define risk ratings associated with a particular rating scope. Risk rating and scope are then associated with a customer or counterparty as part of counterparty setup. The associated probability of default and risk weights are then available to the credit risk engine for processing.

Risk Rating

Select from the available options. This is the primary summary indicator of risk for an institution's individual credit exposures.

Probability of Default

Enter the quantitative likelihood that a customer fails to meet its obligations.

Risk Weight

Enter an alternate numerical interpretation of the risk rating. It is commonly used in place of Probability of Default for standardized Basel II processing.