Loan risk classification refers to the process that commercial banks classify loans into different grades according to the degree of risk, and its essence is to judge the possibility that debtors can repay the loan principal and interest in full and on time.
target
Through loan classification, the following objectives should be achieved:
(1) Revealing the actual value and risk degree of loans, and truly, comprehensively and dynamically reflecting the quality of loans.
(two) timely find the problems existing in the process of credit management, strengthen loan management.
(three) to provide a basis for judging whether the loan loss reserve is sufficient.
principle
The loan classification should follow the following principles:
(1) principle of authenticity. Classification should truly and objectively reflect the risk status of loans.
(2) the principle of timeliness. The classification results should be dynamically adjusted according to the changes in the borrower's business and other conditions.
(3) the principle of importance. For many factors affecting loan classification, the key factors shall be determined according to the core definition in Article 5 of these Guidelines.
(4) the principle of prudence. For loans that are difficult to accurately judge the borrower's repayment ability, the classification level should be appropriately lowered.
History and development
Before 1998, the loan classification method of commercial banks in China basically followed the provisions in the Financial System of Financial Insurance Enterprises promulgated by the Ministry of Finance 1998, and classified loans into four types: normal, overdue, sluggish and bad debts. The latter three types are collectively referred to as non-performing loans, which are referred to as "one excess and two retention" in China. Overdue loans refer to overdue loans, which are overdue as long as they exceed one day; Sluggish refers to loans that are overdue for two years or less, but have stopped operating and the project has been dismounted; Bad debts refer to loans whose value is determined to be irrecoverable and need to be written off according to the relevant regulations of the Ministry of Finance. Most non-performing loans of commercial banks in China have formed a historical problem that should be written off but not written off. This classification method is simple and feasible, and it really played an important role under the enterprise system and financial system at that time. However, with the gradual deepening of economic reform, the disadvantages of this method have gradually emerged, which can no longer meet the needs of economic development and financial reform. For example, an unexpired loan, whether there is a problem in fact, is regarded as normal, and the standard is obviously unknown. For another example, it seems too strict to classify a loans overdue day as a non-performing loan. In addition, this method is an after-the-fact management method, and only after the loan period is exceeded will it be shown as a non-performing loan in the bank account. Therefore, it is very important to improve the quality of bank loans. It is often powerless to take certain protective measures in advance for problem loans. Therefore, with the outstanding problem of non-performing loans, this classification of moths to the fire has reached the point where it must be changed.
1In May 1998, the People's Bank of China formulated the Guiding Principles for Loan Classification with reference to international practices and China's national conditions, requiring commercial banks to classify loan quality into five categories according to the actual repayment ability of borrowers, that is, according to the degree of risk, loans are classified into five categories: normal, concerned, secondary, doubtful and loss, and the last three categories are non-performing loans. This classification method is that the bank mainly determines the risk degree of loan loss according to the borrower's repayment ability, that is, the actual ability to repay the loan principal and interest, and the latter three categories are called non-performing loans. Five-level classification is recognized by the international financial industry as the quality standard of bank loans. Based on dynamic monitoring, this method continuously monitors and analyzes the borrower's cash flow, financial strength, collateral value and other factors to judge the actual loss of the loan. In other words, the five-level classification can no longer judge the loan quality according to the loan term, but can more accurately reflect the real situation of non-performing loans, thus improving the bank's ability to resist risks.
From 2004, two types of banks, the wholly state-owned commercial banks and the joint-stock commercial banks, will adhere to the international standards, cancel the original parallel four-level loan classification system and fully implement the five-level loan classification system.
In 2007, the China Banking Regulatory Commission issued the Guidelines on Loan Risk Classification, which stipulated that the five-level classification of commercial bank loans was the minimum requirement for loan risk classification. Commercial banks can formulate loan classification system and refine the classification method according to their own reality, but it shall not be lower than the requirements of five-level classification, and there is a clear correspondence and conversion relationship with the five-level classification method. At present, many banks have implemented multi-level classification of loan risks. For example, Bank of China implements the 12 classification of 5222 1, Industrial and Commercial Bank of China implements the 12 classification of 4322 1, and Bank of Communications implements the 10 classification of 521.
Five-level classification requirements
Commercial banks should at least classify loans into five categories: normal, concerned, secondary, doubtful and loss, and the latter three categories are collectively referred to as non-performing loans.
Normal: The borrower can perform the contract, and there is no sufficient reason to suspect that the loan principal and interest cannot be repaid in full and on time.
Note: Although the borrower has the ability to repay the loan principal and interest at present, there are some factors that may adversely affect the repayment.
Secondary: The borrower has obvious problems in repayment ability, and cannot fully repay the loan principal and interest by relying entirely on its normal operating income. Even if the guarantee is implemented, it may cause certain losses.
Suspicious: the borrower can't repay the loan principal and interest in full, even if the guarantee is implemented, it will definitely cause great losses.
Loss: After taking all possible measures or all necessary legal procedures, the principal and interest are still unrecoverable, or only a small part can be recovered.
Commercial banks should mainly consider the following factors when classifying loans:
(1) The borrower's repayment ability.
(2) the borrower's repayment record.
(3) The borrower's willingness to repay.
(four) the profitability of the loan project.
(5) loan guarantee.
(six) the legal responsibility to repay the loan.
(7) Credit management of banks.
When classifying loans, the evaluation of the borrower's repayment ability should be the core, the borrower's normal operating income should be the main source of repayment, and the loan guarantee should be the secondary source of repayment.
The borrower's repayment ability includes the borrower's cash flow, financial status, non-financial factors affecting repayment ability, etc.
Customer's credit rating cannot replace the classification of loans, and credit rating can only be used as a reference factor for loan classification.
Retail loans, such as loans to natural persons and small businesses, mainly classify risks according to the length of time in loans overdue. Loans to farmers and rural small and micro enterprises can be classified according to credit rating and guarantee.
The same loan shall not be split and classified.
Specific provisions on classification
At a minimum, the following loans should be classified as concerns:
(1) Although the principal and interest are not overdue, the borrower is suspected of maliciously evading bank debts by means of merger, reorganization or division.
(2) Borrow the new and repay the old, or repay the loan by other financing methods.
(3) change the purpose of the loan.
(4) The principal or interest is overdue.
(5) Some debts of the same borrower to the Bank or other banks are already bad.
(6) Issuing loans in violation of relevant state laws and regulations.
The following loans shall be classified into at least sub-categories:
(a) overdue (including extension) beyond a certain period, the interest receivable will no longer be included in the current profits and losses.
(2) The borrower maliciously evades bank debts by means of merger or division, and the principal or interest is overdue.
Loans that need to be restructured should be at least divided into subcategories.
Restructuring loan refers to a loan in which the bank adjusts the repayment terms of the loan contract due to the borrower's financial situation deterioration or inability to repay.
If the restructured loan is still overdue or the borrower is still unable to repay the loan, it should at least be classified as suspicious.
During the observation period of at least 6 months, the classification level of restructured loans shall not be improved. After the observation period, loans shall be classified in strict accordance with the provisions of these guidelines.
Commercial banks should do the following in loan classification:
(1) Formulating and revising credit asset risk classification management policies, operation implementation rules or business operation procedures.
(2) Development and application of credit asset risk classification operation implementation system and information management system.
(three) to ensure that credit asset classification personnel have the necessary classification knowledge and professional quality.
(four) to establish a complete credit file to ensure the accuracy, continuity and integrity of confidential information.
(5) Establish an effective credit organization and management system, form an internal control mechanism of mutual supervision and restriction, and ensure the independence, continuity and reliability of loan classification.
The senior management of commercial banks shall be responsible for the implementation of the loan classification system and the results of loan classification.
Commercial banks should classify all loans at least once every quarter.
If the factors affecting the borrower's financial situation or loan repayment change significantly, the loan classification should be adjusted in time.
We should pay close attention to non-performing loans, increase the frequency of analysis and classification, and take corresponding management measures according to the risk status of loans.
The number of overdue days is an important reference index for classification. Commercial banks should strengthen the management of loan term.
The internal audit department of a commercial bank shall inspect and evaluate the policies, procedures and implementation of credit asset classification, and report the results in writing to the superior bank or the board of directors, and submit them to the China Banking Regulatory Commission or its dispatched office. The frequency of inspection and evaluation shall not be less than once a year.
The loan classification system formulated by commercial banks shall be reported to China Banking Regulatory Commission or its dispatched office.
Classification of non-credit assets
All kinds of assets other than loans, including direct credit substitution items in off-balance-sheet items, should also be divided into five categories according to net assets, debtor's repayment ability, debtor's credit rating and guarantee, including normal, concerned, secondary, suspicious and loss, of which the latter three categories are collectively referred to as non-performing assets. When classifying, we should focus on the safety degree of asset value, and refer to the standards and requirements of loan risk classification for details.
The CBRC and its dispatched offices shall supervise and manage the classification and quality of loans through on-site inspection and off-site supervision.