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

SAP Term: capital requirement ratio

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Ratio between the capital requirements for the exposures underlying a securitization and the nominal volume or the credit equivalent amount of these underlying exposures.

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• Key Concepts: 
  The capital requirement ratio (CRR) is a measure used in the Financial Services-Banking-Portfolio Management-Credit Risk Management (FS-BA-PM-CR) component of SAP. It is used to calculate the amount of capital that a financial institution must hold in order to meet regulatory requirements. The CRR is calculated by dividing the total capital held by the institution by its total risk-weighted assets. 
  
  How to use it: 
  The CRR can be used to assess the financial health of a financial institution. It can also be used to compare the capital requirements of different institutions and to determine whether an institution is meeting its regulatory requirements. 
  
  Tips & Tricks: 
  When calculating the CRR, it is important to ensure that all risk-weighted assets are included in the calculation. This includes both on- and off-balance sheet items, such as derivatives and securitized assets. 
  
  Related Information: 
  The CRR is closely related to other measures of financial health, such as the leverage ratio and the liquidity coverage ratio. It is also related to other measures of risk, such as value at risk and expected shortfall.