Collateral revaluation are of two types.
Collateral revaluation types can be manual or automatic.
Collaterals which are marked for manual revaluation is not considered for automatic revaluation. You have to manually update the collateral value or dependent value from which collateral value is derived.
When such updating of collateral value is done manually, the system considers the modified collateral value and last revaluation date is updated as the date on which manual revaluation is done. Next revaluation date is blank in case of manual revaluation.
Manual revaluation is part of history of revaluation at collateral level.
Following are the methods of revaluation when revaluation type is automatic.
Following methods are considered for collateral depreciation. Method of depreciation refers to how the cost should be treated as expiring over the life of assets.
If the useful life of assets is 10 years, depreciation is calculated at 10% every year on the original cost. However, rate of depreciation specified is considered for straight line method. Revaluation rate for frequency specified is arrived considering the depreciation rate per year signified.
Written down value method
In this scenario, depreciation value reduces over the period as depreciation is calculated on the written down value of the collateral in second and subsequent years, as compared to the original cost in the first year.
This can be considered with the following example.
Securities type of collateral will follow ‘External’ method of revaluation. Collaterals which are created with security code gets collateral value based on latest price signified for the particular security in GCDSECTY (price fetched externally).
Securities type of collateral which derives its value from security maintenance (GCDSECTY) and accordingly collateral value is calculated.
Whenever price changes for a particular security, latest price is signified in security maintenance for the price code with effective date and collateral marked for external revaluation is picked up and updated with latest price on the next revaluation date and arrive at the modified value the collateral. On the next revaluation date, the system picks up the closest price change (latest price change) when multiple price changes are existing for a particular security to re-evaluate the collateral.
Based on price changes, the collateral value may appreciate or depreciate during revaluation and accordingly collateral value gets updated.
Last revaluation date is updated as the date of automatic revaluation and next revaluation date is updated considering the last revaluation date + frequency + holiday processing setting
History of revaluation is updated and same is available for inquiry at collateral level.
This method can be used for customizing the revaluation process of the collateral.
If the next revaluation date falls on a holiday and holiday settings at collateral level is ignore holidays, the system consider GEDPARAM setting (‘S’ or ‘N’) and accordingly revaluation is done. In case of consecutive holidays covering multiple frequencies revaluation considers the number of frequencies and arrive at collateral value accordingly.
With Holiday Processing setting
In respect collateral with holiday processing settings like move forward/move backward and with consecutive holidays covering multiple frequencies, revaluation considers the number of frequencies and arrive at collateral value accordingly.
In case calendar is not available for either branch or currency on next revaluation date and the holiday processing setting has to consider the holiday for branch and/or currency, next revaluation date is considered as a working date and updated accordingly
When a collateral is suspended, such collaterals are not candidates for automatic revaluation even though next revaluation date is equal to business date. Suspended collaterals cannot be manually revaluated.
However, when suspension is revoked, the system revaluates such collaterals up to date and update the latest collateral value.
When collateral value reduces, revaluation of the collateral stops when the same goes to negative.
When the collateral which is a candidate for automatic revaluation and the modified value on account of revaluation is negative, revaluation process skips such collaterals and exception is logged.
In addition, exception scenarios like on account of revaluation resulting in reduction of collateral value, available amount at linked pool level and/or at facility level goes not negative, such exceptions are logged.
Collateral revaluation of non-market based securities is not subjected to market fluctuation. Hence if such collateral values have to be revised then an input file containing the collateral code of all such collaterals and the latest revised collateral value must be sent to the system. The revaluation process takes place online when ever there is a change in the collateral value.
Example
Non market Based collateral Fixed Deposit (having 100% lendable margin) has been linked to a facility on 1st January 2008 owned by a XYZ customer having the liability Symphony Group.
Liability code |
Line code |
Liability Limit |
Symphony Limit |
Loans |
$1million |
Collateral code |
Collateral Contribution amount |
Cap amount
|
Pool code |
Collateral Pool % linkage |
Pool amt |
Fixed Deposit |
$50,000 |
$50,000 |
Pool1 |
100% |
$50,000 |
Pool contribution to the line
Pool code |
Pool CCY |
Line code
|
Line CCY |
Pool Line Linkage |
Pool contribution amount to line |
Line Available amount |
Pool1 |
USD |
Loans |
USD |
100% |
$50,000 |
$1.05million |
After one Year on 1st January 2009 the Fixed Deposit amount has increased due to interest earned. Now having a revised value as $55,000. Now the latest value has to be sent to the Oracle Banking ELCM system via input file and then the “Collateral Force Revalue” for this collateral has to be triggered manually.
The revaluation increases the overall limit amount as shown below.
Liability Code |
Line Code |
Liability Limit |
|
Symphony Group |
Loans |
$1million |
|
Collateral code |
Pool amount Collateral POOL code Collateral Contribution amount Collateral Value Pool % linkage |
||
Fixed Deposit |
|
$55,000 100% Pool1 $55,000 $55,000 |
|
Pool contribution to the line
Pool code |
Pool CCY |
Line code
|
Line CCY |
Pool Line Linkage |
Pool contribution amount to line |
Line Available amount |
Pool1 |
USD |
Loans |
USD |
100% |
$55,000 |
$1.055million |