What is coverage ratio in SAP FS-CMS - Collateral Management System?

SAP Term: coverage ratio

• Component: FS-CMS

• Component Name: Collateral Management System

• Description: The ratio of the free collateral value of a collateral agreement or collateral pool to the available collateral value, indicating whether you can release a collateral agreement from a collateral pool or whether you can release a part of a collateral agreement.

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• Key Concepts: 
  Coverage ratio is a measure of the amount of collateral held by a lender in relation to the amount of credit extended. In the FS-CMS Collateral Management System, coverage ratio is used to determine the amount of collateral that must be held by a lender in order to secure a loan. 
  
  How to use it: 
  The coverage ratio is calculated by dividing the total value of the collateral held by the lender by the total amount of credit extended. The higher the coverage ratio, the more secure the loan is for the lender. The coverage ratio must be maintained at a certain level in order for the loan to remain secure. 
  
  Tips & Tricks: 
  It is important to monitor the coverage ratio on a regular basis in order to ensure that it remains at an acceptable level. If the coverage ratio falls below the required level, additional collateral may need to be provided in order to secure the loan. 
  
  Related Information: 
  The FS-CMS Collateral Management System also includes other features such as margin calls, which are used to ensure that lenders have sufficient collateral on hand in order to cover any potential losses from loans. Additionally, it provides tools for monitoring and managing collateral across multiple lenders and borrowers.