First of all, banks will judge whether loans are bad debts according to their own risk management system. When the borrower fails to fulfill the repayment obligation for a long time or fails to repay without providing a reasonable explanation, the bank may regard the loan as a bad debt.
Secondly, banks will also consider the borrower's repayment ability. When the borrower's economic situation continues to deteriorate, he can't repay the loan principal and interest, and there is no sign of improvement, the bank may regard the loan as a bad debt.
In addition, even if the loan is regarded as a bad debt, the bank will not write it off immediately. Banks will take a series of measures, such as recovering the arrears through legal means and negotiating with borrowers to recover the losses as much as possible. Only after all or part of the loan cannot be recovered within a certain period of time and after internal audit procedures, the bank will write off bad debts.
In short, banks regard loans as bad debts mainly when borrowers fail to fulfill their repayment obligations for a long time and their repayment ability continues to deteriorate. In addition, banks will not write off all bad debts immediately, but will write them off after certain procedures and efforts to recover the arrears.
Extended data:
Bank loan is a kind of business that banks provide financial support to individuals or enterprises. However, in the actual operation process, due to various reasons, some borrowers may not be able to fulfill their repayment obligations as agreed in the contract, which leads to the problem of bad debts. After banks treat loans as bad debts, they need to write them off in accounting to reflect the actual losses.
In order to avoid the occurrence of non-performing loans, banks will conduct risk assessment in the process of loan approval, evaluate the borrower's repayment ability and credit history, and reduce the loan risk. In addition, the bank will stipulate the borrower's repayment obligation and liability for breach of contract in the loan contract, and reserve the right of recourse for itself.
After bad debts occur, banks will try to recover their debts through various means, such as legal proceedings and negotiations with borrowers. If the loan cannot be recovered or can only be partially recovered after a certain period of efforts, the bank will write off the loan. After the write-off, the bank accountant will clear the corresponding loan amount from the assets and include it in the loss, which will have a certain impact on the financial situation of the bank.
To sum up, the situation that banks regard loans as bad debts is mainly the situation that borrowers cannot fulfill their repayment obligations for a long time and their repayment ability continues to deteriorate. However, not all bad debts will be written off immediately, and banks will try to recover the arrears and make a decision according to internal audit procedures before writing off.
The above is the general situation that banks regard loans as bad debts. According to the specific risk management policies and regulatory requirements of banks, there may be differences in specific operations. Finally, dealing with bad debts is an important part of bank risk management, which is of great significance for maintaining the healthy operation of banks and protecting interests.