The provision ratio is the bad debt reserve and the withdrawal ratio of Shenzhen. The provision rate is the provision for bad debts and bad debts that may occur in bank loans, an aspect of the prudence of banks in identifying and preventing risks, and a quantitative indicator reflecting the authenticity of performance. The lower the ratio, the better. The smaller the reaction loss, the higher the profit. The higher the ratio, the greater the risk, the greater the loss and the smaller the profit.

This indicator reflects the risk degree of bank loans, socio-economic environment, integrity and other aspects 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.

For some banks, the CBRC requires the provision coverage ratio to reach 150%, which is more prudent than adequate provision. The downgrade means that banks don't need to set aside so many reserves.

As can be seen from the bank's income statement, the reserve is deducted from the pre-tax profit as an expense, so if the reserve is reduced, the bank's profit will increase. But from the risk point of view, the less reserves, the greater the risk of bank bad debts.