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Non-performing loans: regulatory and accounting treatments of assets

Bholat, David and Lastra, Rosa and Markose, Sheri and Miglionico, Andrea and Sen, Kallol (2016) Non-performing loans: regulatory and accounting treatments of assets. UNSPECIFIED. 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 (UNSPECIFIED)
Uncontrolled Keywords: G01 G21 M41, Non-performing loans, impairment, loan loss provisions, bank capital, data standards, credit risk.
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 25 Nov 2016 13:01
Last Modified: 17 Aug 2017 17:21
URI: http://repository.essex.ac.uk/id/eprint/18240

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