Collateral in Loan Classification and Provisioning

July 1, 2002

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Format: Chicago

In W Song. Collateral in Loan Classification and Provisioning, (USA: International Monetary Fund, 2002) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Adequate loan classification practices are an essential part of a sound and effective credit risk-management process in a bank. Failure to identify deterioration in credit quality in a timely manner can aggravate and prolong the problem. Two key issues arise with regard to the use of collateral in the context of loan classification and provisioning. In particular, the questions arise whether collateral should be taken into account in classifying a collateralized loan, and whether it should be considered in calculating provisions. This paper surveys country practices in the role of collateral in loan classification and provisioning, and suggests good practices on these issues.

Subject: Banking, Collateral, Financial institutions, Financial regulation and supervision, Loan classification, Loans, Mortgages, Prices, Real estate prices

Keywords: Africa, Banking Supervision, Book value, Collateral, Collateral value, Eastern Europe, Fair value, Financial Regulation, Loan, Loan amount, Loan Classification, Loan decision, Loan institution, Loan portfolio, Loan review, Loan-enforcement action, Loans, Mortgaged collateral, Mortgages, Negative equity, Overcollateralize loan, Provisioning, Real estate prices, WP

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/122
Stock No:

WPIEA1222002
ISBN:

9781451854503
ISSN:

1018-5941

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