What is capital requirement factor in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: capital requirement factor

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Factor that is used to calculate the capital requirement, irrespective of which approach is used. Capital requirement = EAD X capital requirement factor For third-party settlement risks, the capital requirement factor is calculated using the mark-to-market method or the maturity method. For special market risks, the capital requirement is calculated for debt securities or for stocks.

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• Key Concepts: 
  Capital Requirement Factor (CRF) is a component of the Credit Risk Management (CRM) module in SAP Financial Services (FS-BA-PM). It is used to calculate the amount of capital that a financial institution must hold in order to meet regulatory requirements. The CRF is based on the risk profile of the customer and the type of credit product being offered. 
  
  How to use it: 
  The CRF is used to calculate the amount of capital that a financial institution must hold in order to meet regulatory requirements. The CRF is based on the risk profile of the customer and the type of credit product being offered. The CRF can be adjusted by the user to reflect changes in risk profiles or credit products. 
  
  Tips & Tricks: 
  When setting up the CRF, it is important to consider the risk profile of the customer and the type of credit product being offered. This will ensure that the CRF is set up correctly and accurately reflects the risk associated with each customer and credit product. 
  
  Related Information: 
  The CRF is part of SAP Financial Services (FS-BA-PM) Credit Risk Management (CRM) module. It is used in conjunction with other components such as Credit Risk Analysis (CRA), Credit Risk Monitoring (CRM), and Credit Risk Reporting (CRR). For more information on these components, please refer to SAP's documentation.