Provision coverage ratio refers to the ratio of loan loss provision balance to loan balance, which is an index that mainly reflects and supervises the provision provision level of commercial banks. If the calculation formula is changed, the loan provision ratio = loan loss reserve balance/loan balance x 100%. Here, while understanding the loan provision ratio, we also need to know more important asset quality supervision indicators of the banking industry, as well as the non-performing loan ratio and provision coverage ratio. , but they have different meanings. Here we can also know what is the return on investment.

We just know what the loan provision rate is, and here is a detailed introduction. First of all, what is the provision rate? Generally speaking, it refers to the extraction ratio of bad debts and bad debt reserves, and the calculation formula is provision coverage ratio = loan impairment reserve/non-performing loans x 100%. The reason for this ratio is mainly because commercial banks may have bad debt reserves, so these banks will set up this bad debt reserve in order to be cautious and prevent and filter these risks. In other words, the most important significance of the provision rate is a quantitative indicator reflecting the authenticity of performance. Market participants generally believe that the lower the provision ratio, the better, which means that the response loss will be smaller and the corresponding profit will be higher; On the contrary, the proportion is getting higher and higher, that is to say, the risk is getting bigger and bigger, and the final result is big losses and small profits.

Second, the advantages and characteristics of the provision rate

I summarized some characteristics and advantages of the provision ratio, mainly in the following aspects:

First, this ratio should be more suitable for the degree of loan risk to a certain extent, that is to say, it should not be too low, which will lead to insufficient reserve funds and only increase profits; But it can't lead to excess reserves, which will lead to a virtual decline in profits.

Second, the provision ratio generally exists in various forms, namely general provision, special provision and special provision. 20 1 1 year, in order to strengthen the provision supervision, the CBRC put forward new requirements, that is, the loan provision coverage ratio of commercial banks should not be less than 2.5%, and the provision coverage ratio should not be less than 150%.

Thirdly, I have already introduced the loan provision ratio and provision coverage ratio, and here I need to introduce the provision coverage ratio, that is, the provision ratio and provision coverage ratio of non-performing loans. The coverage ratio of non-performing loan provision is a measure index, which is mainly an important indicator to measure whether the loan loss provision of commercial banks is sufficient.