Collateral in Loan Classification and Provisioning

Author/Editor:

In W Song

Publication Date:

July 1, 2002

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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.

Series:

Working Paper No. 2002/122

Subject:

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

English

Publication Date:

July 1, 2002

ISBN/ISSN:

9781451854503/1018-5941

Stock No:

WPIEA1222002

Pages:

24

Please address any questions about this title to publications@imf.org