A covenant is a contractual restriction in a financial agreement placed on the borrower. One common class of covenants is financial covenants, which are based on information found in financial statements. Allowing financial institutions to enter formulas into Statement Analyzer to represent covenants gives them a convenient way to watch for covenants in default. You can apply a covenant to a historical period.

In Statement Analyzer, you can create numerical or yes/no covenants. A numerical covenant uses a formula that you define to determine whether the covenant is in default or not. A yes/no covenant uses a formula based on additional data lines to determine whether the covenant is in default.

Note: The message “Client covenants have been defined” displays on the client basic information section when a covenant exists for a client. Click the pen icon to edit the covenants for a client or select the covenants link to view covenants for a client. If a covenant has not been defined, this message displays: “Client covenants have not yet been defined.” Select the covenants link to create covenants for this client. Covenants may also be edited by selecting Edit Covenants on the flyout and then selecting a client.

Covenants in Default

A covenant is in default if it matches the default criterion that has been set up for it. This criterion is defined by the formula. You can view all of the covenants that are in default by running the Covenant report. Refer to Covenant Reports for more information.

Grace Periods

The grace periods that you can now set for client statements are taken into account when a covenant is evaluated for default status. A grace period can be set for any type of statement (annual, quarterly, or monthly). In addition, while a system administrator can apply a grace period to all client statements, you can also overwrite this grace period setting for specific clients. Refer to About Statement Options dialog box for more information on setting grace periods on a client statement.

Covenant Templates

Statement Analyzer contains a set of best practice covenant templates that you can use when creating a covenant. Refer to the About Covenant Templates topic for more information.