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User Guide: Oracle Financial Services Loan Loss Forecasting and Provisioning, Release 1.5.0.0.0
Contents
PREFACE............................................................................................................................................ IV
INTENDED AUDIENCE ..................................................................................................................................................... IV
DOCUMENTATION ACCESSIBILITY ..................................................................................................................................... IV
ACCESS TO ORACLE SUPPORT .......................................................................................................................................... IV
STRUCTURE.................................................................................................................................................................. IV
RELATED INFORMATION SOURCES .................................................................................................................................... IV
WHAT’S NEW IN THIS RELEASE ........................................................................................................................................ IV
1.
INTRODUCTION ....................................................................................................................... 2
1.1.
2.
SCOPE OF THE APPLICATION...............................................................................................................................2
UNDERSTANDING PROVISION CALCULATION METHODS ........................................... 3
2.1.
CASH FLOW BASED METHOD .............................................................................................................................3
2.1.1. Cash Flow Based Method - Expected Loss Approach .............................................................................4
2.1.2. Cash Flow Based Method - Incurred Loss Approach ..............................................................................5
2.1.3. Calculation of EIR and EIS ......................................................................................................................5
2.1.4. Collective Assessment ............................................................................................................................6
2.2.
PROVISION MATRIX METHOD ............................................................................................................................7
2.3.
RECOVERY RATE METHOD .................................................................................................................................7
2.4.
COLLATERAL VALUE BASED METHOD...................................................................................................................8
2.4.1. Allowance Calculation ............................................................................................................................8
2.5.
ALLOWANCE THRESHOLD ................................................................................................................................10
2.6.
PROVISION AMOUNT CALCULATION ..................................................................................................................10
2.7.
OTHER IMPORTANT CALCULATION: TRANSITION MATRIX ......................................................................................10
2.7.1. Historical Transition Matrices ..............................................................................................................10
2.7.2. Poisson Calculations.............................................................................................................................11
3.
UNDERSTANDING THE LLF&P APPLICATION ................................................................12
3.1.
PROVISION CALCULATION................................................................................................................................12
3.1.1. Expected Loss (EL) Approach ................................................................................................................13
3.1.2. Incurred Loss (IL) Approach ..................................................................................................................19
3.1.3. Historical Transition Matrices (HTM) ...................................................................................................22
3.2.
LOSS FORECASTING ........................................................................................................................................24
4.
PREPARING FOR EXECUTION............................................................................................. 25
4.1.
4.2.
5.
DATA REQUIREMENTS ....................................................................................................................................25
IMPORTANT METADATA DEFINITION .................................................................................................................26
EXECUTION ............................................................................................................................. 30
5.1.
DATA QUALITY FRAMEWORK ...........................................................................................................................30
5.2.
RUN MANAGEMENT ......................................................................................................................................30
5.2.1. Run Management UI Icons...................................................................................................................31
5.2.2. Displaying a Run ..................................................................................................................................31
5.2.3. Modifying a Run ...................................................................................................................................33
5.2.4. Executing a Run....................................................................................................................................37
5.2.5. Database Design ..................................................................................................................................40
5.2.6. Processed Data Maintenance Batch ....................................................................................................41
6.
LOAN LOSS FORECASTING & PROVISIONING REPORTS.............................................. 42
6.1.
HOME PAGE REPORTS ....................................................................................................................................42
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