Collateral Rating System

The collateral rating system (CO-R) determines the base percentage or advance rate per title on a daily basis. The work flow bases on a defined and user specific decision matrix set up with key market figures.Depending on these criteria different advance rates for similar securities could result.

Field of application

Essential basis to define advance rates in TEMOS is the matrix which filters information according to criteria defined by the banks policy. The matrix can be changed and/or maintained flexible. The variety ofmarket figures that could be implemented in the matrix is broad and offers the bank the possibility to build up a highly sophisticated hair cut management. The daily update of haircuts also guarantees a marketoriented supervision of credit risk. Here are some of the common criterias used in the matrix to allocate or reduce basic hair cuts:

• small turn-over in the markets
• old price
• bad bond rating
• quality of the issuer
• domicile of security
• market place
• industrial sector

In respect to Basel II, CO-R qualifies for an analysis to rate a security.