What is consortial pooling in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: consortial pooling

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: In the case of syndicate loans that, due their size or risk, are provided by a consortium of banks, the portion of the loan that each bank has provided is deducted from the total loan. This results in the loan/risk portion of the leading bank in the syndicate.

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• Key Concepts: 
  Consortial pooling is a credit risk management technique used in the FS-BA-PM-CR Credit Risk Management component of SAP. It is a method of pooling credit risk among multiple lenders, allowing them to share the risk of default among themselves. This reduces the overall risk for each lender and allows them to offer more competitive rates.
  
  How to use it: 
  Consortial pooling can be used in SAP by setting up a consortium of lenders and setting up a pooling agreement between them. The agreement should specify the terms of the pooling, such as the amount of risk each lender is willing to take on, the interest rate they will charge, and any other conditions that need to be met. Once the agreement is in place, lenders can then start pooling their credit risk and sharing it among themselves.
  
  Tips & Tricks: 
  When setting up a consortial pooling agreement, it is important to make sure that all parties involved understand the terms and conditions of the agreement. It is also important to ensure that all parties are aware of their responsibilities and obligations under the agreement. Additionally, it is important to monitor the performance of the pooling agreement over time to ensure that it is meeting its objectives.
  
  Related Information: 
  Consortial pooling is just one of many credit risk management techniques available in SAP. Other techniques include credit scoring, collateral management, and portfolio management. Additionally, there are various tools available in SAP that can help lenders manage their credit risk more effectively.