Normal, Concerned, Subprime, Doubtful, Loss

The specific standards are as follows:?

What are the classification standards for loans to enterprises and institutions and other loans to natural persons?

Rural cooperative financial institutions, on the basis of fully analyzing the likelihood of the borrower's timely and full return of the loan principal and interest, determine the classification results strictly based on the core definitions after initially dividing the enterprise and public utility unit loans and other loans to natural persons into classification classes with reference to the following basic standards: ?

1. The following situations are categorized as normal: ?

(1) The borrower is capable of fulfilling his commitments, has a good will to repay the loan, is in normal condition in all aspects such as operation and finance, and is able to repay the principal and interest normally, and the rural cooperative financial institution has sufficient certainty that the borrower will eventually repay the loan.?

(2) The borrower may have certain negative factors, but the cash flow is sufficient and will not materially affect the full repayment of the principal and interest of the loan as promised.?

2. Any of the following circumstances are generally classified as concern:?

(1) The borrower's sales revenue, operating profit declines or signs of illiquidity, and some key financial indicators show abnormal and unfavorable changes or are lower than the average level of the same industry;?

(2) The borrower's contingent liabilities (e.g., external guarantees, issuance of commercial bills of exchange, etc.) are too large or have risen substantially compared with the previous period;?

(3) Significant factors unfavorable to loan repayment (e.g., extension of the construction period of an infrastructure project, excessive budgetary adjustments) in the borrower's fixed asset loan project;?

(4) the borrower's business management has major problems or fails to use the loan for the agreed purpose;?

(5) The restructuring of the borrower or guarantor (such as separation, merger, lease, contract, joint venture, shareholding reform, etc.) may have an adverse effect on the loan;?

(6) Significant changes in the borrower's major shareholders, affiliates or parent or subsidiary companies that are unfavorable to loan repayment;?

(7) significant disagreement in the management of the Borrower or changes in the character of the legal representatives and principal operators that are unfavorable to the repayment of the loan;?

(8) Loans granted in violation of industry credit management rules or regulatory regulations of the supervisory authority;?

(9) the borrower's loans with other financial institutions are categorized as subprime;?

(10) Changes in external factors such as macroeconomics, market, industry, and management policies adversely affect the Borrower's operations and may affect the Borrower's ability to repay its debts;?

(11) The borrower is in the process of shutting down or semi-suspension of production, but the rate of credit (pledge) is sufficient, and the value of the collateral is far greater than the value of the loan principal and interest and the cost of realizing the claim, so that the borrower has sufficient certainty about the ultimate recovery of the loan.

(12) If the enterprise is operating normally and can repay the principal and interest according to the contract, the loan can be repaid by the enterprise.

(13) The borrower's ability to repay the loan is poor, but the guarantor David repayment ability is strong?

(14) The value of the collateral or pledge for the loan has declined, or the rural cooperative financial institution has lost control over the collateral (pledge); the validity of the guarantee is in question, which may affect the return of the loan;?

(15) Loans or advances for off-balance-sheet business with principal or interest overdue (including rollover, the same hereinafter) for 90 days or less, or for 30 days or less.?

3. Those with one of the following conditions are generally classified as subprime: ?

(1) the borrower is operating at a loss, has payment difficulties and has difficulty in obtaining additional sources of funding, and has negative cash flow from operating activities;?

(2) the borrower is unable to pay its debts to other creditors;?

(3) the borrower has been obliged to raise funds for repayment by selling or realizing major production and business fixed assets to maintain production and operation, or by auctioning collateral or fulfilling guarantee obligations;?

(4) the borrower has used improper means such as concealing facts to obtain the loan;?

(5) Problems in the internal management of the borrower, which constitutes substantial damage to normal operation and hinders the timely and full settlement of the debt;?

(6) the borrower is in a semi-suspended state and the guarantee is average or poor;?

(7) "Borrowing new loans to repay old ones" for the purpose of collecting loan principal and interest, preserving assets, etc.;?

(8) restructured loans that are repayable;?

(9) Incomplete credit files and loss of important legal documents that materially affect repayment;?

(10) the borrower's loans with other financial institutions are classified as doubtful;?

(11) Loans granted in violation of national laws and administrative regulations;?

(12) Loans or advances from off-balance sheet business with principal or interest overdue for 91 to 180 days (inclusive) or 31 to 90 days (inclusive).?

4. Those with one of the following conditions are generally classified as doubtful: ?

(1) the borrower is in a state of shutdown, semi-suspension of production fixed asset loan project is in a state of stopping or slowing down the construction;?

(2) the borrower is actually insolvent;?

(3) the borrower enters into liquidation proceedings;?

(4) the borrower or its legal representative is involved in a major case, which has a significant impact on the normal business activities of the borrower;?

(5) after the borrower's restructuring, it is difficult to implement the debt of the rural cooperative financial institution or although the debt is implemented, it is unable to make normal repayment of principal and interest;?

(6) After repeated negotiations the borrower obviously has no willingness to repay;?

(7) The borrower has resorted to law to collect the loan;?

(8) After the loan restructuring, the borrower still fails to return the principal and interest normally;?

(9) the borrower's loans with other financial institutions are classified as loss category;?

(10) Loans or off-balance-sheet business advances with principal or interest overdue for more than 181 days or more than 91 days.?

5. General classification in the loss category for any of the following:?

(1) Loans that cannot be recovered after the borrower terminates its legal personality due to dissolution, closure, revocation, or declaration of bankruptcy in accordance with the law, and after the rural credit union recovers from the borrower and its guarantor in accordance with the law;?

(2) the borrower has completely ceased business activities and there is no hope for resumption of work, or there is no market for its products, and it is on the verge of closure due to serious insolvency, and the rural credit union fails to recover the loan after liquidating its property and recovering from its guarantor in accordance with the law;?

(3) the death of the borrower, or declared missing in accordance with the provisions of the General Principles of the Civil Law of the People's Republic of China **** and the rural credit unions in accordance with the law on its property or inheritance, and the guarantor of the recovery failed to recover the loan;?

(4) Loans for which the borrower has suffered from a major natural disaster or accident, the loss of which is huge and cannot be compensated by insurance, and which he is really unable to repay; or the part of the loan which he is really unable to repay after the insurance compensation is settled, and which the rural credit union fails to recover after settling his property or estate according to the law, and after making a recovery against the guarantor; and?

(5) Loans that cannot be recovered by the rural credit unions after the borrowers have violated the criminal law and have been sentenced to penalties according to the law, and their properties are insufficient to return the borrowed debts, and there is no other debt-bearer;?

(6) the borrower and his guarantor cannot repay the debt due, the rural credit union goes to law, and after the court enforces the execution against the borrower and the guarantor, the borrower and the guarantor have no property to execute, and after the court decides to terminate the execution, the rural credit union is still unable to recover the loan;?

(7) Due to the reasons mentioned in (1) to (6) above, the borrower is unable to repay the debt when it becomes due, and the rural credit unions are still unable to recover the loans which are still uncollectible after recovering the difference between the legally acquired debt-crediting assets, recorded at the fair market value confirmed by appraisal and deducting the cost of receiving the debt-crediting assets, and the principal and interest on the loans; and?

(8) When advances are incurred for the issuance of letters of credit, handling of promissory notes, issuance of guarantees, etc., where the applicant for the issuance of the letter of credit and the guarantor are unable to repay the advances due to the reasons mentioned in items (1) to (6) above, the advances are still uncollectible after recovery by the rural credit unions;?

(9) Net loss incurred by the Rural Credit Union due to forgery, fraudulent use or fraudulent claim of the bank card;?

(10) loans that are uncollectible after the student loans are overdue and the rural credit unions are unable to collect them within the effective recourse period determined and after the collateral (pledge) of the student loans is disposed of in accordance with the law to recover joint and several liabilities from the guarantors;?

(11) other receivables incurred by rural credit unions other than loan principal and interest receivable that are overdue for three years and uncollectible.?

(12) Loans that have exceeded the statute of limitations.?

(13) Credit assets that meet one of the conditions for being recognized as doubtful debts as stipulated in the Circular of the Ministry of Finance on the Issuance of the Administrative Measures for the Write-off of Doubtful Debts of Financial Enterprises<
(Caijin [2005] No. 50);?

(14) the borrower is unable to repay the loan and can only recover a very small portion of it even if it disposes of the collateral (pledge) or recovers from the guarantor, and the projected loan loss ratio exceeds 85%.?

Extended information:

1. The nature and status of the People's Bank of China: the People's Bank of China is the People's Republic of China *** and the country's central bank. Under the leadership of the State Council, the People's Bank of China formulates and implements monetary policy, prevents and resolves financial risks, and maintains financial stability.

2. The central bank on behalf of the state financial regulation and management, is a special financial institution with the nature of the state institutions, with the primary and secondary have two attributes, on the one hand, the central bank is a bank, but not a general bank, but a special bank; on the other hand, the central bank is a state institution, but not a general state institution, but a special state institution.

In these two attributes, the banking attribute is the foundation and the state institution attribute is the dominant. The combination and adaptation of banking duties with state functions is the central bank.

3. First of all, the central bank, unlike commercial banks, is a special financial institution, as shown in:

(1) Special business purposes. The central bank and general financial institutions, although both engaged in monetary credit activities, but their business purposes are very different, general financial institutions are special enterprises, the purpose of business is to obtain profits.

And the central bank in engaged in monetary credit enterprise although also can get some profit, but it is not to get profit for the purpose, but on behalf of the country to formulate and implement unified monetary and financial policies, supervise the business activities of financial institutions in the country, through the monetary credit activities to adjust the monetary fund activities, so as to achieve certain macroeconomic purposes.

(2) Special business objects. General financial institutions are to a large number of enterprises and individuals as the object of business, while the central bank is not to industrial and commercial enterprises and individuals as the object of business, but to financial institutions and the government as the object of business.

(3) Possession of legal privileges. Central banks enjoy certain privileges granted by national laws, which are incomparable to general financial institutions. General financial institutions in the national financial regulations within the scope of the operation of monetary funds, is an independent enterprise legal person, only the general rights of legal persons; and the central bank as a national institution enjoys the privileges granted by law.

For example: the monopoly of currency issuance; centralized management of reserve funds; agent of the country for international financial exchanges, so that the central bank has become a special legal person above the commercial banks and other financial institutions, is the government's bank, in a supreme position, and even enjoy part of the legislative and administrative power in some countries, has a high degree of independence.

(4) special leading members. General financial institutions, the leading members of the founders or controlling interest in how much through the general meeting of shareholders elected, and for the central bank, regardless of the form of its organization, the leading members are appointed by the national government and recommended, and have a certain term of office. For example, the U.S. Federal Reserve Board of seven directors, are appointed by the President; the Bank of England's eighteen directors recommended by the government, the King of England appointed.

(5) Special ways of doing business.

4. Although the central bank business operations are also mainly deposits, loans and remittances, but the way is significantly different from the general financial institutions.

(1) the central bank's deposits are mainly composed of financial deposits and financial institutions reserve deposits. Fiscal deposits are the central bank agent of the national treasury results, purely custodial nature, deposit reserves and current deposits account deposits, is the central bank centralized deposit reserves and for the bill clearing service results, belongs to the nature of the regulation and the nature of the service.

So, the central bank generally do not pay interest on deposits or pay interest is very low, and by the central bank autonomy, not according to the market demand and supply; At the same time, the central bank can also be adjusted by the deposit reserve ratio to make their deposits increase or decrease.

(2) In the use of funds, more based on the consideration of the macroeconomic situation, and there is no security, profitability, liquidity problems. Moreover, much of the central bank's use of funds is of a short-term regulatory nature. Thirdly, in order to strengthen its authority and to facilitate the understanding of its financial policy by domestic and foreign parties, the central bank has to publish its business status and related information on a regular basis, while it is not necessary for general financial institutions to do so.

The above illustrates that the central bank, on behalf of the state, formulates and implements macro-financial regulation and management policies, while commercial banks and other financial institutions, as enterprises, engage in micro-financial activities.

Reference:Baidu Encyclopedia - Five Levels of Loan Classification