Bank provision refers to bank loan loss provision and bank asset loss provision. Bank provision plays a key role in improving the ability of banks to digest non-performing assets, so its importance can be imagined. The function of bank provision is to truly reflect the fair value of assets. The essence of whether the bank reserve is profit or expense depends on whether the reserve can make up for the possible loss of future loans, and the profit under the insufficient bank reserve is overestimated.

Provision coverage ratio (also known as "provision adequacy ratio") is actually the utilization rate of bad debts and bad debt reserves that may occur in bank loans. The coverage ratio of non-performing loan provision is an important indicator to measure the adequacy of loan loss provision of commercial banks. This indicator reflects the degree of risk, socio-economic environment and credit status of bank loans from a macro perspective.

According to the Risk Rating System of Joint-stock Commercial Banks (Provisional), the provision coverage ratio is the ratio of actual loan loss provision to loan loss provision, and the best state of this ratio is 100%. The provision coverage ratio is an important indicator of a bank, which examines whether the bank's finances are sound and whether the risks are controllable.

The loan loss reserve adequacy ratio is the ratio of the actual loan provision to the proposed provision, which should not be less than 100%. Reserve adequacy indicators include asset loss reserve adequacy ratio and loan loss reserve adequacy ratio. The asset loss reserve adequacy ratio is a first-class indicator, and the ratio of actual provision to provision for credit risk assets should be no less than100%; The loan loss reserve adequacy ratio is the ratio of actual loan provision to required loan provision, which should be no less than 100%, and it is a secondary indicator.

Loan loss provision is a provision made according to the degree of loan loss when there is objective evidence that the loan is impaired, so as to make up for special losses, possible losses that have not been identified separately, and loan risks of a certain country, region, industry or type. At the end of the period, the bank analyzes the recoverability of various loans and predicts the possible loan losses.

Reserve coverage ratio

Also known as "provision adequacy ratio", it is the bad debt reserve that may actually occur in bank loans and the utilization rate of Shenzhen. The coverage ratio of non-performing loan provision is an important indicator to measure the adequacy of loan loss provision of commercial banks. This indicator reflects the degree of risk, socio-economic environment and credit status of bank loans from a macro perspective.

According to the Risk Rating System of Joint-stock Commercial Banks (Provisional), the provision coverage ratio is the ratio of actual loan losses to non-performing loans, and the best state of this ratio is 100%. The provision coverage ratio is an important indicator of a bank, which examines whether the bank's finances are sound and whether the risks are controllable.