Measure České národní banka č. 272 / 1997 Coll.
Measures of the Czech National Bank laying down the principles for the classification of credit claims and the making of adjustments to these claims
Valid
Measures
Text versions:
12.11.1997
272
MEASURES
Czech National Banks
of 17 September 1997
laying down the principles governing the classification of credit claims and the making of adjustments to those claims
Czech National Bank pursuant to § 15 of Act No. 21 / 1992 Coll., on Banks, as amended, provides:
Basic provisions
(1) This measure applies to banks and branches of foreign banks operating in the Czech Republic (hereinafter referred to as "the bank ').
(2) The Bank shall classify its claims on loans granted to customers, including those arising from the implementation of guarantees, hereinafter referred to as "the receivable," and shall charge the claims in accordance with the principles laid down in this measure. The classification of the claims is the basis for the formation of the bank's adjustments.
(3) The classification of claims shall be carried out at least quarterly on the basis of an evaluation of the current accounting year or periods preceding that. The classification of the claims expresses the level of expected risks and potential losses.
(4) The Bank creates sufficient adjustments. The correction items are used to cover the risks associated with a specific claim.
(5) For the purposes of this measure, the client of the bank is legal and natural persons.
Category of claims
(1) A claim means the sum of principal, interest and charges.
(2) The Bank shall assess the claim in accordance with the criteria set out in this measure and include it in one of the following categories:
(a) standard claims;
(b) the claims observed;
(c) non-standard claims;
(d) dubious claims;
(e) loss-making claims.
(3) The observed, non-standard, doubtful and loss-making claims are called classified claims.
(4) In assessing the claim, the bank does not take into account the amount and quality of its collateral.
(1) In the assessment, the Bank also takes into account other external economic and political factors and conditions which may affect the quality of the claim.
(2) The bank shall include the claim in the higher-risk category if, under any circumstances, it assumes a loss higher than that corresponding to the inclusion of the claim under Paragraph 2 (2).
(3) If a bank grants a loan to the debtor to repay its classified claim, the loan is classified in the same or worse risk category as the debt that was repaid by that loan. In the event that a claim is referred to the bank, the bank shall assess the claim and include it in the risk category corresponding to the criteria set out in the measure.
(4) The Czech National Bank is entitled to decide to include the claim in the relevant category by way of derogation from the classification carried out by the Bank in cases where the Bank classified the claim in breach of this measure.
(5) The bank shall keep a register of classified claims broken down into past and past claims.
Standard claims
(1) Standard claims are claims repaid by the debtor under agreed conditions. The debtor is in a favourable financial and pension situation and there is no reason to doubt the timely settlement of the bank's entire debt.
(2) The Bank shall include, in the category of standard claims, the claims referred to in paragraph 1, as well as claims meeting all of the following criteria:
(a) repayments of principal, interest or charges are duly paid or are less than 31 days overdue;
(b) the bank has sufficient information on the debtor's financial and pension situation within 30 days from the date on which they were to be available to the bank;
(c) none of its claims have been restructured in the last three years due to its difficult financial and pension situation.
Observed claims
(1) The claims observed are those which, on the basis of an assessment of the borrower's creditworthiness, can be expected to be repaid in full. However, there has been a deterioration in the facts affecting the repayment of principal, interest and charges since the loan was granted but no loss is expected at the time of the assessment of the claim.
(2) In the category of debt to be monitored, the bank shall include the claims referred to in paragraph 1 as well as claims meeting at least one of the following criteria:
(a) repayments of principal, interest or charges are payable for more than 30 days and less than 91 days;
(b) the bank does not have sufficient information on the debtor's financial and pension situation for more than 30 days and less than 91 days from the date on which they were to be available to the bank;
(c) on the basis of information on the financial and pension situation of the debtor, the bank has revised the debt repayment plan more than six months and less than three years ago;
(d) it is a claim complying with the criteria set out in Section 4 but not fully secured against exchange rate risk. 1)
Non-standard claims
(1) Non-standard claims have all the deficiencies contained in the assessment of the claims observed, with full repayment of principal, interest and fees being uncertain on the basis of the rating of the borrower's creditworthiness. Partial repayment of the claim is highly likely.
(2) In the category of non-standard claims, the bank shall include the claims referred to in paragraph 1 and claims meeting at least one of the following criteria:
(a) repayments of principal, interest or charges are payable for more than 90 days and less than 181 days;
(b) the bank does not have sufficient information on the debtor's financial and pension situation for more than 90 days and less than 181 days from the date on which they were to be available to the bank, or the information on the borrower indicates that the repayment of the claim in full at the time of its maturity is uncertain;
(c) on the basis of information on the debtor's financial and pension situation, the bank revised the debt repayment plan less than six months ago.
Doubtful claims
(1) Doubtful claims have all the deficiencies contained in the assessment of non-standard claims, with full repayment of principal, interest and charges being highly unlikely on the basis of the rating of the borrower's creditworthiness. Partial repayment of the claim is possible and likely.
(2) In the category of doubtful claims, the bank shall include the claims referred to in paragraph 1 as well as claims meeting at least one of the following criteria:
(a) repayments of principal, interest or charges are payable for more than 180 days and less than 361 days;
(b) the bank does not have sufficient information on the debtor's financial and pension situation for more than 180 days and less than 361 days from the date on which they were to be available to the bank, or the information on the borrower indicates that the full repayment of the claim at the time of its maturity is highly unlikely.
Loss claims
(1) Loss claims have all the shortcomings contained in the assessment of doubtful claims, with full repayment of principal, interest and charges being impossible on the basis of the rating of the borrower's creditworthiness. These claims appear to be irrecoverable or recoverable only partially at very low value. The partial return on the claim may be feasible in the future. The Bank shall endeavour to repay these claims until it is established with certainty that further repayment is impossible. If the impairment of the claim is permanent, the bank shall write off the claim.
(2) In the category of loss-making claims, the bank shall include the claims referred to in paragraph 1 as well as claims meeting at least one of the following criteria:
(a) repayments of principal, interest or charges are payable after 361 days or more;
(b) the bank does not have sufficient information on the financial and pension situation of the debtor 361 or more days from the date on which they were to be available to the bank, or the information on the debtor shows that repayment of the full amount at the time of its maturity is impossible.
(3) The bank shall report the claim as loss-making if the debtor is in bankruptcy or settlement proceedings.
Production of adjustment appropriations
(1) The Bank shall make adjustments to individual classified claims at least as follows:
(a) the following claims:
adjusted value of receivables multiplied by koef. 0,05;
(b) to non-standard claims:
adjusted value of receivables multiplied by coef. 0,2;
(c) dubious claims:
adjusted value of receivables multiplied by koef. 0,5; and
(d) to loss-making claims:
adjusted value of receivables multiplied by koef. 1,0.
(2) The adjusted value of the claims for the purposes of this measure is the nominal value of the claims less the value of the quality collateral of the respective claims.
(3) The Bank will set up a system for assessing the quality of the collateral. This system shall include, in particular, the categorisation of collateral, the method of monitoring, the valuation and the frequency of revaluation of the value of collateral.
(4) The Bank shall adjust the amount of the adjustments made to cover potential losses on classified claims on the last day of each calendar month.
(5) The justification and adequacy of the amount of the adjustment must be demonstrated by the bank.
Reporting of classified claims
(1) In the event that the claim fulfils the conditions of classified claims, the bank shall not report that claim or part thereof in other synthetic accounts or other accounts in an analytical register not classified under the relevant category.
(2) The bank shall keep a classified claim on the relevant synthetic or relevant account in the analytical records at all times in its outstanding amount. At the same time, the bank shall classify all other claims on the same client in the same synthetic account or under the same category, even if their maturity has not yet occurred.
Reporting of claims
(1) The statement of claims according to their classification and the statement of claims outstanding within the time limit, including the annexes (hereinafter referred to as the "notice"), shall be drawn up in accordance with the models. Binding reporting models and deadlines for their submission are set by the Czech National Bank.2)
(2) The Bank will ensure that the information contained in the reports is complete and correct.
(3) The Bank shall request an auditor designated under a separate regulation, (3) to verify and draw up a report on whether:
(a) the system for the classification of claims and the reporting system shall be built in such a way as to show faithfully the classification of claims and the creation of reserves and the adjustments to those claims;
(b) the system for assessing the quality of the security of claims shall be established in such a way as to meet the requirements of Article 9 (3);
(c) the data in the reports for the previous calendar year are complete and correct.
(4) The Bank shall submit a report to the Czech National Bank pursuant to paragraph 3 by 30 April of the following year at the latest.
Final provisions
(1) The Bank will issue an internal regulation which will, in accordance with this measure, adapt the principles of the classification of credit claims and reserve formation and the adjustments to those claims and the system for assessing the quality of the collateral.
(2) The internal regulation referred to in paragraph 1 shall be submitted by the Bank to the Czech National Bank by 30 November 1997 at the latest. The Bank will also submit to the Czech National Bank any changes to the internal rules immediately upon their adoption.
Repeal
The Czech National Bank measure 165 / 1994 Coll., laying down the principles for the classification of claims on loans and reserve formation and the adjustments to these claims, as amended by the Czech National Bank measure No 8 of 30 December 1994, notified in the amount of 5 / 1995 Coll.
Efficacy
This measure shall take effect on 1 January 1998.
Governor:
v. Ing. Vít v. r.
Vice-Governor
1) For example, by the foreign exchange collection of the debtor, an appropriate type of derivative, etc.
2) § 41 paragraph 2 of the ČNR Act No. 6 / 1993 Coll., on the Czech National Bank.
3) § 22 of Act No. 21 / 1992 Coll., on Banks.
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Regulation Information
| Citation | Measure Česká národní banka č. 272 / 1997 Coll., laying down the principles for the classification of credit claims and the making of adjustments to these claims |
|---|---|
| Regulation Type | Measures |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 12.11.1997 |
|---|---|
| Effective from | - |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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