Introduction to Asset Classification and Provisioning

This module allows the classification of assets based on the number of payments in default or based on the duration of the debit balance of the account without any significant credit movements.

Storing the asset classification categories, definition of parameters and methods, frequency for calculation of provision based on asset classification, provision to store the bill details, details of overdrawn accounts are all existing functionalities in the system that will be reused for this functionality.

The asset classification can be made for syndicated loans, where the overdue will get written to the SL.OD.PART and SL.OD.DUES applications.

The AFRACP.ACCOUNT.DAYS.PAST.DUE application is introduced to store the movement in the classification based on the number of days past due.

Click here to understand the terms and abbreviations used in this module.

Provisioning

This functionality allows banks to calculate the provision amount based on the assets which are classified depending on the guarantee type during the life cycle of an asset.

Provisioning refers to a mitigation technic that the bank has to do depending on the classification of assets if it get defaulted in terms of payment.

For a provisioning of an assets that is going in loss today, the bank will have to perform a write off from their balance sheet and that will affect their profitability. The bank will perform an analysis during the life of an asset and will do a reserve.

Once users classify an asses, create a provision, the third step will be to post the provision.

This will allow stakeholders to have a view on the quality of the bank based on the assets and see what is the protection based on the deposits, in case the bank will be affected.

The classification is done on a daily basis in core and there is a provisioning calculation posting monthly or quarterly.

The PV.MANAGEMENT, PV.PROFILE and PV.LOAN.CLASSIFICATION applications are used to calculate the provisioning, classification of an asset and post the provision. The classification is done based on the PV.MANAGEMENT application.

The following items are introduced as part of this functionality:

• The AFRACP.CUS.ASSET.CLASSIFICATION.DETAILS application is introduced to store the classification details at the customer level, based on the outcome of the asset classification, obligor and contagion processes.
• The AFRACP.PROVISION.CALC.PARAM application is introduced to store all the parameter values required for asset provisioning.
• The AFRACP.PV.GET.CALCULATION API is introduced to calculate the detailed from the AFRACP.CUS.ASSET.CLASSIFICATION.DETAILS application.
• The following fields were added to the AFRACP.CUS.ASSET.CLASSIFICATION.DETAILS application: Id, Cust Asset Classification Date Cust Asset Classification, Year Start Date and Year End Date.
• The following fields were added to the AFRACP.PROVISION.CALC.PARAM application: Id, Type of Guarantee, No of Yrs Max Prov, Year, Guarantee Type Code, Prov Code Rate, Year Start No Day and Year End No Day.