What is credit equivalent class in SAP IS-B-RA-CL - Default Risk and Limit System?

SAP Term: credit equivalent class

• Component: IS-B-RA-CL

• Component Name: Default Risk and Limit System

• Description: Credit Equivalent Class In the calculation of the expected loss and the country value-at-risk, the credit equivalent class categorizes a correction factor. This correction factor describes the rescheduling frequency of a product. &EXAMPLE& Short-term commercial loans to banks are usually treated as having a lower probability of rescheduling than loans to companies that may or may not be for commercial purposes.

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• Key Concepts: 
  Credit equivalent class is a component of the IS-B-RA-CL Default Risk and Limit System. It is used to classify customers into different risk categories based on their creditworthiness. The system assigns a credit equivalent class to each customer, which is used to determine the amount of risk associated with that customer. 
  
  How to use it: 
  The credit equivalent class is used to determine the amount of risk associated with a customer. The system assigns a credit equivalent class to each customer, which is then used to determine the amount of risk associated with that customer. The higher the credit equivalent class, the higher the risk associated with that customer. 
  
  Tips & Tricks: 
  It is important to regularly review and update the credit equivalent classes assigned to customers in order to ensure that they are accurately reflecting the current risk associated with each customer. This will help ensure that customers are not taking on more risk than they can handle. 
  
  Related Information: 
  The IS-B-RA-CL Default Risk and Limit System also includes other components such as credit limit, collateral, and payment terms. These components are used in conjunction with the credit equivalent class to determine the amount of risk associated with a customer.