solution in detail banking flexible financial lending

Solution in Detail

2013 SAP AG

Banking

Flexible Financial Lending

Executive Summary Solution Overview Contact Us

2013 SAP AG or an SAP affiliate company. All rights reserved.

1 / 22 2013 SAP AG or an SAP affiliate company.

All rights reserved.

Implement Financing Innovations

Commercial lending customers range from

start-ups with thin credit to global corporations

with adequate funding options.

Several economic downturns and the global

financial crisis have led to tightened access to

lending. Banks have raised lending rates in

response to higher funding costs, anticipated

loan losses, and the impending implementation

of Basel capital and liquidity standards.

Small businesses rely on external funding to

operate and expand, but their vulnerable and

volatile revenue streams make them a high

financial risk. This reality has had a dampening

effect on response time, approval rate,

and price.

Banks are reassessing the risks of lending to

specific sectors that account for a dispropor-

tionate share of impaired loans. For example,

many have scaled down exposure to the

commercial property sector. On the mortgage

lending front, credit approvals and the loan-to-

value ratio are falling because an inordinate

number of houses are under water worth less than the loans made on them.

Commercial banks must provide flexible end-to-

end business processes to accommodate highly

individualized customer needs and manage risk

exposure while complying with changing

regulations.

One IT solution needed using

SAP software

Source: SAP/ING Real Estate

Finance (BTS)

Since the global financial crisis, banks have been striving to rebuild trust and create

value. They focus on managing risk exposure, work to improve risk-adjusted

profitability, and offer custom financing for new credit needs. Flexible Lending Operations

Financing Innovations

SAP Innovations

Loan Management




Businesses rely on banks for financing and

they expect risk-adjusted pricing, lending pro-

cesses tailored to their needs, compliance with

regulations, and reduced closing times and

costs. Banks must have a centralized view of

the overall customer relationship.

Furthermore, customer-specific credit apprais-

als, flexible credit lines, cross-asset-class

collateralization of liabilities, and refinancing of

asset portfolios are essential building blocks of

the commercial lending business.

Our commercial lending solutions offer

comprehensive support for complex high-value

lending with powerful parameter definitions,

integrated customer information, credit line

setup, comprehensive loan servicing, collateral

management, and receivables refinancing.

Our banking software is based on service-

oriented architecture, integrates readily, and

supports a high level of automation and

streamlining, helping banks maximize their

resources.

Build Flexible Lending Operations

Banks need end-to-end support of lending processes with a high degree of

flexibility to accommodate highly individualized customer needs.


Flexible Lending Operations


SAP Innovations

Loan Management



Banks must maximize their resources and streamline operations to adapt to the

pressures of lower production volume and greater loan maintenance expenses.

Banks can leverage integrated SAP solutions for use in commercial banking

to meet the credit needs of all their customers, from global conglomerates to

start-ups.

Manage Loan Portfolios Effectively

Increase flexibility and time to market through powerful product-configuration capabilities

Reduce operational cost by cutting redundancies and increasing process automation

Mitigate risk with a 360-degree customer view, collateral management, and supporting business processes

Increase liquidity with a securitization solution

80% Improvement in time to

market


Finance (BTS)




SAP Innovations

Loan Management



Analytics

Transaction and customer servicing separate

the best from the merely adequate banking

providers, but banking providers with analytics

and the ability to exploit Big Data efficiently and

effectively will thrive in uncertain markets.

Database and technology solutions, including

the SAP HANA platform, help banking experts

analyze large amounts of data gathered from

all commercial banking activity and transferred

to the analytical system over standard

interfaces.

Applications

The SAP NetWeaver technology platform gives

banks a cost-efficient and system-independent

foundation for high-availability functionality on a

scalable architecture. Ease of integration is

facilitated with service-oriented architecture and

rich standard interfaces. The SAP for Banking

solution portfolio is aligned with published

Banking Industry Architecture Network (BIAN)

standards.

Mobile

SAP solutions include support for an end-to-

end mobile strategy that enables mobile access

to lending operations for the bank and its

customers.

SAP Innovations

Our commercial lending solutions leverage emerging technologies to enable

a rapid response to market dynamics, products tailored to a wide spectrum of

customers, real-time banking, multichannel accessibility, support for multiple

currencies and countries, and scalability for business growth.




SAP Innovations

Loan Management



Support Operational Efficiency

Loans Management

Enables mapping of various lending instruments with flexible product definition. It

offers high-level possibilities for individualization in product offerings and efficient,

end-to-end support for loan processing.

Collateral Management

Enables effective handling of collaterals by supporting the end-to-end process that

links origination, servicing, and credit risk management plans through provision of the

right information.

Funding Management

Enables securitization of assets with flexible structuring and centralized portfolio

management of assets and transactions.


Solution Overview

Loans Management


Funding Management

Why SAP?

Commercial Banking

Operation



Our commercial lending solu-

tions offer comprehensive

business process support with

operational efficiency to help

banks differentiate from the

competition.

Commercial Lending Operations


Solution Overview

Loans Management


Funding Management

Why SAP?

Commercial Banking

Operation

Database

and

Technologies

Sales and

Service

Commercial

Banking

Operations

Loans Management Funding Management Collateral Management

Origination

Payment

Management

Provisioning

Handing Over to Operations

Facilities

New Business Position

Management

Originating

Collateral

Managing

Collateral

Structuring of

Transactions

Monitoring and

Liquidating

Collateral

Funding Portfolio

Management Reporting

Transaction Analysis Based on SAP HANA



The solution for loans management helps

banks cater to businesses from small and medium enterprises to large corporations within a single platform. It supports multiple

types of lending instruments from simple bilateral loans to complex, highly individualized

big-ticket loans and credit facilities.

It enables exhaustive back-office processes

with a high degree of flexibility, resulting in

efficient and effective transaction processing.

Smooth integration with other components

helps banks reduce process and data

redundancy and increase straight-through

processing.

Our solution for loans management

offers comprehensive functions to

address all commercial credit needs.

It offers a flexible framework to offer

tailor-made financing quickly and

efficiently.

Loans Management

Capabilities

Loans Management

Benefits

SAP Innovations

Solution Overview




A powerful product configurator coupled

with flexible pricing parameters, calcu-

lation methods, and payment processes

supports a wide range of commercial

lending loan products. A credit facility

framework enables definition of sub-

ordinate credit lines.

Real- and near-time data integration with other

SAP software that supports financial accounting,

loan origination, collateral management,

refinancing, and treasury operations helps

ensure end-to-end coverage, increased

straight-through processing, and reduced

dependency on diverse IT systems.

Extensive application interfaces based on

service-oriented architecture technologies

enable additional customer-specific process

support.

Lending with Operational Efficiency

Capabilities

Benefits

SAP Innovations

Solution Overview


Loans Management

Support of loans given and taken, flexible

payment processes, payment postprocessing

functions, and rich business-operation categories

help ensure complete support of the loan

lifecycle.

Central management of information gives a

360-degree view of the customer relationship

and supports compliance demands and risk

exposures.



With flexible parameter definitions and automa-

ted process support, the solution handles a wide

range of lending instruments on loans given and

taken. It is scalable, can adapt to a wide lending

base from large corporations to small and midsize enterprises in niche markets and has functions for multiple channels, languages,

banks, and countries coupled with functions for a

credit line facility.

Customized reporting options and data upload

to analytical systems facilitates access to action-

able, consolidated information that helps banks

predicate customer needs, increase cross-selling

success, drive higher retention, and win new

customers.

A simple implementation cycle, native integration

with other SAP software, and redundancy reduc-

tion lower the total cost of ownership and help

banks differentiate from the competition.

A breadth of product and service offerings, pro-

cess simplification, and less decision time can

win new business, increase customer wallet

share, and gain market share.

Use of a single lending application helps

leverage flexible loan-servicing features,

traditionally exclusive to large corporate

lending, to design differentiating products

for small businesses.

Adapt to the Evolving Financing Needs of

Commercial Clients

Capabilities

Benefits

SAP Innovations

Solution Overview


Loans Management



Large amounts of transaction data gathered

from commercial lending activities can be

smoothly transferred to analytical systems over

standard interfaces. With the adoption of SAP

Business Suite software on the SAP HANA

platform, banks can now exploit Big Data and

increase efficiency with granular, real-time

predictive updates on operations and risk.

Visualization of actionable information on

bankers dashboards further enhances data consumption.

Breakthrough technologies help banks

adapt to changing regulations and

economic volatility with transparency

and agility.

Innovations for Loans Management

A 360-degree view of the customer relationship

with the bank, payment history, and collateral

status results in better decisions, risk

mitigation, and improved loan portfolios.

Capabilities

Benefits

SAP Innovations

Solution Overview


Loans Management



The collateral management solution minimizes

manual processing and provides flexible

functions to map simple and complex relation-

ships between receivables, collateral assets,

collateral providers, and collateral assignees.

It complies with regulations such as Basel II,

and easily integrates with operative transaction,

risk management, document management, and

reporting systems.

The centralized solution provides a timely,

aggregated view of collateral activities across

the institution. Process-support tools help lead

to efficiency in workflow features, correspon-

dence tools, and links to optical archives.

The SAP Collateral Management

application gives banks the front- and

back-end support they need for efficient

collateral-handling and risk mitigation.


Capabilities


Benefits

SAP Innovations

Solution Overview


75% Increase in process automation

and auditability for easier

collateral tracking and reporting

Source: The Land and Agricultural

Development Bank of South

Africa (The Land Bank)



The solution offers flexible functions for

administering collateral agreements,

collateral amounts, encumbrance, and

declaration of purpose and supports

maintenance of relationships between

assets, transactions, and collateral

agreements.

Parameterization can be used to adapt to

extensive lists of predefined collateral agree-

ments. Handling of collateral processes like

assignment and full and partial deletion is

supported, including related calculations like

collateral cover distribution, loan-to-value

ratios, free collateral calculation, and collateral

shortfalls.

It complies with market regulations like Basel II.

Centralize Cross-Asset Collateral

Capabilities

Benefits

SAP Innovations

Solution Overview



50% Improvement in manageability

of complex collateral for

accurate monitoring of value

and risk

Source: The Land and Agricultural

Development Bank of South

Africa (The Land Bank)

Integrated object-management features can

store and value fine-grain data for collateral

objects and connect to external collateral-object

systems.

A 360-degree, real-time customer view provides

complete lists of loans, deposits, and collaterals

across the IT landscape. It provides flexibility to

set up preapproved collateral coverage gaps to

preferred customers.



A centralized collateral solution helps banks ad-

dress new challenges from the global financial

crisis like higher volumes of collateralized loans, new security classes as collateral, and compliance

with new regulations.

The solution supports firmwide, flexible reporting,

including collateral shortfalls and composition of

multiasset collateral for internal risk management.

Managing collateral as a common service across

all asset classes reduces process redundancy and

costs and enables centralized capture and

management of collateral-related information with

respect to risk exposure across counterparty

relationships, products, and geography.

By running the collateral lifecycle from origination,

to middle office, and to back office on a single

platform, the solution helps banks streamline

credit approval processes while complying with

credit risk regulation.

The solution helps banks reduce regulatory

capital requirements by providing high-fidelity

data for Basel II regulations.

Within collateralized transaction credit

limits, banks can do more business,

price trades competitively, reduce

economic and regulatory capital, and

achieve higher risk-adjusted return on

capital.

Optimize Financing Operations with Collateralization

99% Loans with complete collateral

information


Finance (BTS)

Capabilities

Benefits

SAP Innovations

Solution Overview





Both market participants and regulators

increasingly focus on reducing counterparty

risk and improving liquidity profiles. The

reduction in unsecured credit lending has

resulted in a surge of asset types and volume

under collateral management.

Centralized collateral management, including

use of the SAP HANA platform, helps banks

come close to achieving real-time management

of exposures and predictive risk analysis.

Innovations for Collateral Management

Analysis and visualization of actionable data on

collateral shortfalls and collateralized counter-

party exposure help enable banks make

informed decisions and comply with

regulations.

Capabilities

Benefits

SAP Innovations

Solution Overview

Help for banks to address the chal-

lenges associated with growth and the

accompanying complexity of secured

lending.





SAP Funding Management provides a central

collateral allocation management to improve a

financial institutions funding business and increase transparency.

The SAP Funding Management

application helps banks and financial

service providers get transparency to

use all available assets for collaterali-

zation in asset-based funding deals

like securitization.

Funding Management

Capabilities

Funding Management

Benefits

SAP Innovations

Solution Overview


The application provides business functionality

for securitization, covered bonds, asset-backed

loans, pool syndication, and other funding deal

categories.



Central Asset Warehouse

From the funding viewpoint, contracts can be

stored and handled in multiple asset classes,

and the asset warehouse can serve as the

transparent funding ground of all fundable

assets.

Pool Management

Funding programs can be set up on top of the

funding ground. Assets are allocated automat-

ically based on selection criteria and can be

refined with further selection criteria or a simple

sampling algorithm. Qualified pools scan be

reserved for offer to investors, split and

refinanced, or customized into different

funding types.

Transaction Processing

If a funding transaction is fixed, processing of

the asset pool and the investor deal starts.

Asset events are monitored according to

deal type.

Accounting

The funding solution is integrated into the

SAP General Ledger application.

Integration

SAP Funding Management integrates with

SAP Business Suite and is open to any other

SAP or non-SAP asset holding software.

Address Collateralized Funding Demands

Capabilities

Benefits

Solution Overview


Funding Management



Banks can lower operational costs by managing

all qualified loan or leasing assets as collaterals

in one central funding solution. Full transparency

of unfunded assets makes them available for

future funding deals.

The solution helps minimize implementation

cost with prebuilt business functionality for

covered bonds, securitization, and other asset-

backed funding deals.

Banks can provide highly qualified asset port-

folios to investors. Whenever the collaterals of

a pool change, the solution can automatically

replenish the pool based on predefined criteria

and send a notification to the investor.

Banks gain new business and improve investor

retention and loyalty by offering transparent

and collateralized deals.

Achieve transparency of all collaterali-

zation functions, lower cost, and

increase flexibility in the refinancing

business.

Optimize Funding and Reduce Refinancing

Processing Cost

Capabilities

Benefits

Solution Overview


Funding Management



Commercial Lending An Integral Part of Our Solutions for Commercial Banking Operations


Solution Overview

Loans Management


Funding Management

Why SAP?

Commercial Banking

Operation

SAP solutions address key requirements of

commercial banking operations

Customer and

Product

Management

Centralized

Payment

Processing

Cash Position

Management

Loans

Management

Customer

Liquidity

Optimization

Collateral

Management

Funding

Management

Customer and

Product

Management

Full-Service

Leasing Contract

Management

Lease

Accounting and

Finance

Cash and

Liquidity

Management

Commercial

Lending

Leasing

Customer

Onboarding

Exchange

Financial

Messages

Monitor

Financial

Services

Network



Why SAP?

Our banking solutions leverage technology innovations to provide fast responses to

market dynamics; real-time visibility of customer and regulatory demands; and low-

cost, highly scalable, and flexible deployment options.

Comprehensive Enterprise Support

Our commercial lending solutions deliver integrated business processes and applications on a

unified platform with comprehensive business insight.

Efficient process orchestration and business process flexibility enable banks to deliver

differentiated products and services.

Leveraging Key Breakthrough Innovations

The SAP solution portfolio leverages the industrys most innovative technologies. It combines solutions for database and technology, mobile, analytics, and cloud-based deployment options to

enable optimization and efficiency at the lowest possible cost.

Proven Time to Value in Large-Scale Implementations

The SAP solution portfolio provides banks with a proven implementation model to mitigate risk and

to achieve a quick time to value.


Solution Overview

Loans Management


Funding Management

Why SAP?

Commercial Banking

Operation



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Solution in Detail

Banking

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solution in detail banking flexible financial lending

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