What is credit enhancement level in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: credit enhancement level

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: Key figure that relates to a tranche and describes the ratio between the nominal value of all tranches that are junior to this particular tranche, which contains the securitization exposure and the total nominal value of all the tranches.

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• Key Concepts: 
  Credit enhancement level is a feature of the Credit Risk Management component of SAP Financial Services Business Application (FS-BA-PM-CR). It is used to define the creditworthiness of a customer or counterparty. The credit enhancement level is determined by the credit rating of the customer or counterparty, and is used to determine the amount of credit that can be extended to them. 
  
  How to use it: 
  The credit enhancement level is set by the user in the Credit Risk Management component of SAP Financial Services Business Application (FS-BA-PM-CR). The user can set the credit enhancement level for each customer or counterparty, based on their credit rating. The higher the credit rating, the higher the credit enhancement level. 
  
  Tips & Tricks: 
  It is important to keep track of changes in a customer or counterparty’s credit rating, as this will affect their credit enhancement level. It is also important to ensure that the credit enhancement level is set correctly for each customer or counterparty, as this will affect how much credit can be extended to them. 
  
  Related Information: 
  The Credit Risk Management component of SAP Financial Services Business Application (FS-BA-PM-CR) also includes features such as Credit Limit Monitoring and Credit Exposure Monitoring, which can be used to monitor and manage a customer or counterparty’s credit risk.