What is the 5-level loan classification?

1. The 5-level loan classification is a 5-level classification of loan quality required by the People's Bank of China based on the borrower's actual repayment ability. , and classify loans according to risk levels: normal loans, special mention loans, substandard loans, doubtful loans, and loss loans.

2. It should be noted that with the 5-level loan classification, the later the borrower’s credit conditions are proven to be worse, the lower the repayment ability and willingness to repay, the higher the loan interest rate obtained. In particular, the last three types are non-performing loans. Once the bank successfully lends, it is very likely to lose principal and interest.

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Five-level classification of loans

1. Normal: Normal means that the borrower has been able to repay the principal and interest normally after applying for the loan, and the bank can repay the loan on time to the borrower. We are fully confident that the loan loss rate is zero; the borrower can fulfill the contract and there is no sufficient reason to suspect that the loan principal and interest cannot be repaid in full and on time.

2. Attention: The attention category refers to the borrower's ability to repay the principal and interest, but there are some factors that may interfere with the repayment of the loan. The bank determines that the loss rate of the loan is 5%; although the borrower has the ability to repay The loan has principal and interest, but there are factors that may adversely affect repayment.

3. Substandard: Substandard means that there is an obvious problem with the borrower's repayment ability, and the borrower cannot repay the loan due to his income, and needs to use mortgage or financing to repay the loan. The loan loss rate is between 30% and 50%; there are obvious problems with the borrower's repayment ability, and it is unable to fully repay the principal and interest of the loan solely relying on its normal operating income. Even if the guarantee is executed, certain losses may occur. loss.

4. Suspicious: Suspicious means that the borrower is unable to repay the loan, and even repayment through mortgage or guarantee will cause certain losses. The loss rate of the loan is between 50% and 75%; the borrower cannot repay the principal and interest of the loan in full, and even if the guarantee is executed, it will definitely cause greater losses.

5. Loss: Loss refers to the borrower's inability to repay the loan no matter what method he takes. Loan loss rates ranged from 75 to 100 percent. After taking all possible measures or all necessary legal procedures, the principal and interest still cannot be recovered, or only a very small part is recovered.

The five-level loan classification is a five-level classification of loan quality required by the People's Bank of China based on the borrower's actual repayment ability, and the loans are divided according to the degree of risk: normal loans, special-mention loans, Subprime loans, doubtful loans, loss loans.

It should be noted that with the 5-level loan classification, the later the borrower’s credit conditions are proven to be worse, the repayment ability and willingness to repay are lower, and the loan interest rate obtained may be higher, especially in the later stage. Three types are non-performing loans. Once the bank successfully lends money, it is very likely to lose principal and interest. What are the five-level loan classification standards?

The definitions of the five types of loans are:

Normal: The borrower can fulfill the contract and there is no sufficient reason to suspect that the loan principal and interest cannot be repaid in full and on time.

Attention: Although the borrower is currently able to repay the principal and interest of the loan, there are some factors that may adversely affect repayment.

Substandard: The borrower has obvious problems with its repayment ability. It is unable to fully repay the principal and interest of the loan solely relying on its normal operating income. Even if the guarantee is executed, certain losses may occur.

Suspicious: The borrower cannot repay the principal and interest of the loan in full, and even if the guarantee is executed, it will definitely cause large losses.

Loss: After taking all possible measures or all necessary legal procedures, the principal and interest still cannot be recovered, or only a very small part can be recovered.

Extended information:

Early loan classification

Before 1998, the loan classification methods of Chinese commercial banks basically followed the "Financial Finance" issued by the Ministry of Finance in 1993. The regulations in the "Financial System of Insurance Enterprises" classify loans into four types: normal, overdue, sluggish and bad debts. The latter three are collectively called non-performing loans, which are referred to as "one overdue and two bad debts" in my country.

Overdue loans refer to loans that are overdue and have not been repaid for more than one day; sluggish loans refer to loans that are overdue for two years or that are less than two years old but operations have ceased and projects have been cancelled; bad debts refer to loans that are overdue according to financial regulations. Loans that are determined to be irrecoverable according to the relevant regulations of the Ministry of Finance and need to be written off against bad debt reserves.

Most of the bad debt loans of Chinese commercial banks have formed historical problems that should have been written off but failed to be written off.

This classification method is simple and easy to implement. It did play 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 gradually emerged. It can no longer meet the needs of economic development and financial reform.

For example, undue loans are regarded as normal regardless of whether there are problems in fact. Obviously the standards are unclear. For another example, it seems too strict to classify loans that are one day overdue as non-performing loans. In addition, this method is an after-the-fact management method. Only when the loan term is exceeded will it appear as a non-performing loan on the bank's account.

Therefore, it improves the quality of bank loans. Taking certain protective measures against problem loans in advance is often powerless. Therefore, as the problem of non-performing loans becomes more prominent, this classification method has reached a point where it is necessary to change it. What is the five-level classification of bank loans?

The five-level classification of bank loans*** has five levels: normal, special mention, substandard, doubtful and loss.

Normal: Normal means that the borrower has been able to repay the principal and interest normally after applying for a loan. The bank is fully confident that the borrower can repay the loan on time, and the loan loss rate is zero;

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Attention: The special attention category means that the borrower is currently able to repay the principal and interest, but there are some factors that may interfere with the repayment of the loan. The bank determines that the loss rate of the loan is 5%;

Substandard : Substandard means that there are obvious problems with the borrower's repayment ability. The borrower cannot repay the loan based on its current income and needs to use mortgage or financing to repay the loan. The loan loss rate is between 30% and 50%;

Suspicious: Suspicious means that the borrower is unable to repay the loan, even if it is repaid through mortgage or guarantee, it will cause certain loss. The loss rate on a loan ranges from 50 to 75 percent;

Loss: A loss refers to the borrower's inability to repay the loan regardless of the method used. Loan loss rates ranged from 75 to 100 percent.