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Non-performing loans: regulatory and accounting treatments of assets

Bholat, D and Lastra, R and Markose, S and Miglionico, A and Sen, K (2016) Non-performing loans: regulatory and accounting treatments of assets. Working Paper. UNSPECIFIED.

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Abstract

Asset quality is an essential part of sound banking. However, asset quality is difficult for banking regulators and investors to assess in the absence of a common, cross-border scheme to classify assets. Currently no standard is applied universally to classify loans, the most sizable asset on many banks’ balance sheets. As a corollary, no common definition of non-performing loans (NPLs) exists. This paper documents divergences in the definition of NPLs across countries, accounting regimes, firms and data sources. The paper’s originality is in attending to the legal, accounting, statistical, economic and strategic aspects of loan loss provisioning (LLP) and NPLs, topics that are multidisciplinary by nature but have not been dealt with in the literature in an integrated fashion before. Since the 2007 Great Financial Crisis (GFC), accounting bodies and prudential regulators are increasingly focused on early recognition of credit losses and enhanced disclosure. A common approach to NPL recognition might complement these initiatives.

Item Type: Monograph (Working Paper)
Additional Information: Source info: Bank of England Working Paper No. 594
Uncontrolled Keywords: G01 G21 M41; Non-performing loans; impairment; loan loss provisions; bank capital; data standards; credit risk.; credit risk
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Economics, Department of
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 25 Nov 2016 13:01
Last Modified: 06 Jan 2022 14:42
URI: http://repository.essex.ac.uk/id/eprint/18240

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