Configuring the Loan Loss Category driver

This driver provides the organizational structure used for the Loan Loss Reserve utility. It is where you identify the companies the utility will process, the loan categories associated with those companies, and to which departments the results will be saved. You identify whether categories are identified by the ACCT dimension and which department grouping column identifies the company for the purposes of calculating reserves and provision expense. It is also where you enter the initial estimates of the coverage ratio, charge off ratio, and recovery ratio.

TIP: You can edit these ratios on a case by case basis, as needed, using the Loan Loss Reserve utility.

The driver and Loan Loss Reserve utility uses the DEPT.Company column to derive the default column for Company. You can choose a different department grouping column for Company in the new grouping column’s description column, as described below. Select the grouping column if it does not have a separate description column.

The Loan Loss Category sheet will appear with all of the active categories. You can use these reserve subcategories to separate groups of loans that have different loss characteristics than the general population of loans mapped to the reserve category but are included in the accounts mapped to a reserve category. For example, a special loans group is included in commercial loans that can only be identified by department, or the loans in a certain region has more risk and requires higher reserves than other members of that category.

The relationship between reserve category and reserve subcategory is one to one, so if you require a separate category of loans that are included in multiple reserve categories, then you will need to add a separate reserve subcategory to each reserve category.

To configure Loan Loss Category driver:

  1. From the Command Center home page, click Financial Planning.
  2. Open the budget, scenario, or forecast for which to edit the driver.

  3. Click the Drivers & Assumptions tab. and from the list of drivers, click the Loan Loss Category link.

    NOTE: The driver opens in the Desktop Client and displays the Loan Loss Category sheet by default.

  4. In the Main ribbon tab, click Refresh.

    NOTE: Generally, you will only refresh the driver once, though it is possible to refresh to add new reserve categories or to use new statistics accounts. Refreshing inserts new categories into a selected company.

  5. In the Refresh Variables dialog, click Choose Value to select the companies in which to update the driver values.

    NOTE: Only select those companies with loan balances that require loan loss reserves and that are included in the budget or forecast you are configuring.

  6. For each company, complete the following columns:

    Column Name Description
    Active

    Double-click the ellipsis, and do one of the following:

    • To activate the category, select True.

    • To deactivate the category, select False.
    Reserve categories The categories mapped in the ACCT dimension.
    STAT ACCT To select a statistical account added to the account, budget account, and forecast account, double-click the ellipsis. You can use the same statistic account for every category or separate them for each category.
    BudgetPlanCode To select a budget in which to apply the loan category, double-click the ellipsis.
    Coverage Ratio Type the initial ratio used to calculate the general reserve as a percentage of covered loan balances.
    Charge off Ratio type the initial ratio used to calculate monthly charge offs as a percentage of covered loan balances.
    Recovery Ratio Type the initial ratio used to calculate monthly recoveries as a percentage of covered loan balances.
    Filter for Reserve Categories Create a filter to only use for child categories added in this sheet. This is used to support queries that retrieve data records from the accounts or products mapped to the parent category in the dimension tables. This filter generally uses a combination of department and account to limit the query to relevant data records. If you use account, you must limit the filter to the accounts mapped to the parent category in the ACCT dimension.

  7. To save your changes, in the Main ribbon tab, click Save.