Decree No. 319 / 2005 Coll.
Order laying down rules on the classification of claims and the creation of adjustment items and provisions for savings and credit cooperatives
Valid
Order
Effective from 01.10.2005
Text versions:
01.10.2005
12.08.2005
319
DECLARATION
of 29 July 2005
laying down rules on the classification of claims and the creation of adjustment items and provisions for savings and credit cooperatives
The Ministry of Finance, on a proposal from the Office for the Supervisory of Cooperative Deposits pursuant to § 28i (a) of Act No. 87 / 1995 Coll., on savings and credit cooperatives and certain measures related thereto and on the addition of the Act of the Czech National Council No. 586 / 1992 Coll., on Income Taxes, as amended, as amended, as amended by Act No. 280 / 2004 Coll., (hereinafter referred to as "the Act ') to the implementation of Section 11 (1) of the Act:
Subject matter
(1) The purpose of this decree is to lay down rules governing:
(a) the classification of the selected asset items of the cooperative which are their claims;
(b) the creation of adjustments to claims and provisions on selected off-balance-sheet items of cooperative advances.
(2) That decree shall specify the content, form and periodicity of the information obligations relating to the rules referred to in paragraph 1.
(3) Claims under this Order do not include claims arising from holdings of securities and claims on employment and similar relationships.
Definition of terms
For the purposes of this decree:
(a) selected off-balance-sheet items provided by credit facilities, guarantees and guarantees provided, acceptance of foreign notes, guarantees granted from transferred notes, exchange-rate handles, open letters of credit and confirmed letters of credit;
(b) the liability of the claim to interest and charges relating to the claim, including related late payment interest claims and contractual fines;
(c) by the debtor, the person for whom the cooperative deposit has a claim or potential claim on a off-balance-sheet item;
(d) a claim fully secured by a high-quality security of the valuation claim used for the initial recognition of the debt in the accounts, increased by the accrued facilities booked and reduced by the principal payments already received, which is secured by at least 100% of the high-quality collateral on the basis of which the cooperative is satisfied in the event of default of the debtor;
1. the central government or central bank of a Member State of the European Economic Area (EEA) or of another State which is a full member of the Organisation for Economic Cooperation and Development (OECD) or of a State which has concluded a loan agreement with the International Monetary Fund under the so-called General Loan Agreement (GAB); or
2. by a person whose obligations are fully guaranteed by an unconditional, explicit and unlimited guarantee from the State referred to in point 1; or
3. the European Community, or
4. a central government or a central bank of a State other than that referred to in point 1, where the debt of that State has not been restructured; or
5. bonds issued by persons under points 1 to 4; or
6. deposits deposited with the creditor cooperative reserve where the cooperative reserve has the assurance that their use is excluded for purposes other than the satisfaction of the hedged asset in the event of default of the debtor for the duration of the guarantee;
(e) a restructured debt claim for which the cooperative guarantee has, in view of the financial situation of the debtor, made a change in the terms of the contract for the benefit of the debtor, which it would not have undertaken if the failure to implement that change had not increased the likelihood of the loss of the cooperative guarantee resulting from the default of the debtor. This is in particular a revision of the repayment plan, a reduction in the interest rate, a waiver of interest on late payments. A claim arising from the renewal of a short-term credit for circulation assets shall not be regarded as a restructured claim if the debtor has fulfilled all of his payment and non-payment obligations under the credit agreement.
Classification of individual claims
(1) The cooperative shall classify the claims individually, assessed on the basis of any reduction in their balance sheet value in one of the following categories:
(a) standard claims;
(b) the claims observed;
(c) non-standard claims;
(d) dubious claims;
(e) loss-making claims.
(2) Non-standard, doubtful and loss-making claims are collectively referred to as at-risk claims.
(3) A standard claim means a claim for a debtor whose full repayment is not in doubt. The repayment of principal and accessories is duly paid, none of which has been due for more than 30 days, none of which has been restructured in the last 2 years due to the deterioration of its financial situation. The following may also be considered a standard claim:
(a) a claim for a person referred to in § 2 (d) (1) to (4), with no repayment of principal or accessory exceeding 540 days after maturity;
(b) a claim fully secured by high-quality collateral under § 2 (d), with no repayment of principal or accessory exceeding 540 days after maturity.
(4) The debt to be recovered shall be that which is likely to be repaid in full in particular in view of the financial and economic situation of the debtor. The repayment of the principal or of the accessory is covered by partial problems, but none of them is past due for more than 90 days, none of the debts owed to the debtor has been restructured in the last 6 months due to the deterioration of its financial situation. The following may also be considered as a debt claim:
(a) a claim for a person referred to in § 2 (d) (1) to (4), with at least one instalment of principal or accessory being more than 540 days overdue;
(b) the claim fully secured by the person referred to in § 2 (d) (1) to (4), with at least one repayment of the principal or accessory being more than 540 days after maturity.
(5) Non-standard claim means a claim whose full repayment is uncertain in particular in view of the debtor's financial and economic situation, but a partial repayment is highly likely. Reimbursements of principal or accessory are paid with problems, but none of them are past 180 days.
(6) A doubtful claim is a claim whose full repayment is highly unlikely, and partial repayment is possible and likely, in particular in view of the debtor's financial and economic situation. The principal or accessory payments are paid with problems, but none of them are due for more than 360 days.
(7) A loss claim means a claim whose full repayment is highly unlikely to be possible, in particular in view of the financial and economic situation of the debtor. It is assumed that this claim will not be satisfied or will only be satisfied partially in a very small amount. The repayment of principal or accessory is over 360 days. The following shall also be considered as loss-making:
(a) a claim against the debtor in the settlement procedure;
(b) a claim for the debtor whose property has been declared bankrupt, unless it is a claim for substance arising after the declaration of bankruptcy, which shall be assessed in accordance with Article 4 (1).
(1) In determining whether the balance sheet value of individual claims and their classification has been reduced, the cooperative shall assess and take into account at least the following criteria:
(a) the financial and economic situation of the debtor and its development, on the basis of current information;
(b) breach of contract by the debtor, in particular delay in the payment of accessories, principal or non-payment, failure to fulfil information obligations to the cooperative advance payment;
(c) carrying out the restructuring of the debt;
(d) external economic, political and legal factors;
(e) the expectation that, on the basis of the debtor's financial situation, the court will authorise the debtor to settle or declare bankruptcy on his property.
(2) If the individual claim assessed at the same time meets the criteria for inclusion in several categories, the cooperative shall include it in the worst of these categories. A cooperative deposit may not proceed in this way for a claim fully secured by high quality collateral, regardless of other criteria, it may be classified as standard or monitored claims.
(3) If the cooperative has several individually assessed claims on the same debtor, it classifies them in the same category, according to the claim having the worst rating. The co-operative may not proceed as follows:
(a) for claims on a person under § 2 (d) (1) to (4),
(b) for claims fully secured by high quality collateral,
(c) in the case of claims for substance arising after the declaration of bankruptcy.
(4) At the time of the restructuring, the restructured claim is classified by the cooperative as being or should have been classified on the basis of an assessment of the criteria referred to in paragraph 1 before the restructuring. If the cooperative is able to demonstrate that the risk of default of this claim has decreased compared to the situation before the restructuring, it may be classified as a better category. This is without prejudice to the provisions of Sections 3 (3) and (4).
(5) A claim arising from a cooperative advance in connection with the transfer of another of its claims or in connection with the granting of a loan to repay another of its claims is classified as a cooperative advance under the classification when it is established in the same category as the original claim. If the cooperative is able to demonstrate that the risk of default of this claim has decreased compared to the pre-transfer situation, it may be classified as a better category.
(6) A cooperative advance claim in connection with the assignment of a group of other claims within the classification classifies the cooperative advance in the category in which the principal share of the transferred claims was or should have been assigned. If the cooperative is able to demonstrate that the risk of default of this claim has decreased compared to the pre-transfer situation, it may be classified as a better category.
(7) The cooperative shall continuously determine whether the balance sheet value of individual claims has been reduced and subsequently classify them in the relevant categories in line with the results of the classification findings.
Classification of portfolios of claims requiring attention
(1) If the cooperative pool has multiple standard claims for which a reduction in the balance sheet value has not been identified in the assessment of individual claims under their classification and which show similar characteristics in relation to credit risk (hereinafter referred to as "the uniform standard claim"), it shall include them in the portfolio. If it identifies a reduction in the balance sheet value of this portfolio, it shall classify it as a portfolio of claims requiring attention.
(2) The reason for the reduction in the balance sheet value of the portfolio of homogeneous standard claims arising from post-debt events is the existence of observable data indicating a decrease in the expected future cash flows from that portfolio, although this reduction cannot yet be identified on the basis of the individual claims assigned to the portfolio.
(3) The indicator for the reduction of expected future cash flows from the portfolio of homogeneous standard claims may be in particular:
(a) increasing unemployment in the relevant areas;
(b) a reduction in real estate prices in the relevant areas;
(c) adverse conditions in the sectors where debtors operate;
(d) an increase in the number of debtors who fully draw their limit and repay their liabilities at the minimum possible amount.
(4) Where a cooperative advance claim is met, classified in a portfolio classified as a portfolio of claims requiring attention, features of the debt being monitored or at risk, the cooperative shall remove the claim from that portfolio and include it in the covered or at risk of individually assessed claims.
Adjustments to individual claims
(1) If a reduction in the balance sheet value of a claim and the cooperative deposit of a claim or part thereof corresponding to a loss on the balance sheet value is not deducted, the claim shall be subject to an adjustment. A claim for a debtor in respect of which the court rejected the application for bankruptcy for lack of assets or annulled the bankruptcy on the ground that the property was not sufficient to cover the costs of the bankruptcy, the cooperative bank always departs in full.
(2) The co-operative shall form the weightings for the claims observed and at risk under the individual claims assessed and shall assign the weightings created to each claim.
(3) The cooperative reserve determines the corrective item by multiplying the difference between the principal of the claim plus accrued accessories and the cooperative reserve taken into account by securing the claim by the coefficient:
(a) 0,01 in the case of a monitored debt;
(b) 0,2 in the case of a non-standard claim;
(c) 0,5 in the case of a dubious claim;
(d) 1,0 in the case of a loss-making claim.
(4) The cooperative reserve shall verify that the loss on a well-classified, non-standard or doubtful claim is not higher than the adjustment item determined in accordance with the above calculation. If the loss is higher than the adjustment item, the cooperative shall increase the coefficient, but in such a way that the claim observed is less than 0,2, for a non-standard claim less than 0,5 and for a dubious claim less than 1,0.
(5) If the cooperative advance determines the adjustment to the claim at the time the accounting case is carried out at cost, it shall take into account when making adjustments whether, at the time the accounting case is carried out, there is a difference between the cost of the claim and the principal amount of the claim plus accrued accessories. If the purchase price of the claim is lower than the principal of the claim plus accrued accessories, the cooperative shall reduce the adjustment item determined in accordance with paragraph 3 by that difference or part thereof. If the purchase price of the claim is higher than the principal of the claim plus accrued accessories, the cooperative shall increase the adjustment item determined in accordance with paragraph 3 by that difference.
(6) The amount of the adjustment to the claim incurred by the cooperative advance in connection with the transfer of a group of other of its claims shall be that of the cooperative advance at the level of the transfer, so that the principal of the claim increased by accrued accessories and reduced by the amount of the adjustment made is not higher than the sum of the principal of the claims transferred plus the accrued allowances and reduced by the amount of the adjustment made in the event that the transfer would not take place and the cooperative advance would constitute the weightings for each claim.
(7) The cooperative reserve shall continuously assess the adequacy and justification of the adjustments made to the claims observed and at risk and shall adjust their amount.
Adjustments to portfolios of claims requiring attention
(1) If the cooperative pool assesses the claims referred to in § 5, it shall constitute an adjustment item corresponding to a reduction in the balance sheet value of the portfolio of claims identified under § 5 (2).
(2) The Cooperative Reserve assigns to individual portfolios of claims requiring attention, does not divide and assign them to individual claims included in the portfolio.
(3) The cooperative reserve shall continuously assess the adequacy and justification of the adjustments made to individual portfolios of claims requiring attention and shall adjust their amount.
Taking into account the protection of claims in the formation of adjustments
(1) A cooperative reserve may take into account, when setting up adjustments to claims, their collateral, which may in particular take the form of a pledge, guarantee, guarantee or credit derivative, provided that such collateral meets the following conditions:
(a) the contractual provisions and legislation clearly provide for a cooperative advance guarantee that, in the event of default of the debtor, the collateral may be satisfied by the performance of the pledge, the sale of collateral;
(b) the satisfaction of the cooperative is capable of being carried out within a reasonable time after the default of the debtor;
(c) the cooperative reserve shall take into account the collateral at a maximum of its net realisable value, minus the amount used to secure other assets or assets of third parties, if they are entitled to satisfaction before the cooperative reserve and up to the amount of the valuation of the debt in the accounts. The net realisable value of the collateral is the estimated value for the purposes of this decree which the cooperative will receive after deduction of the estimated cost of the collateral. If the cooperative is expected to realise collateral over a period exceeding the calendar year, it shall also take into account the time value of the money when calculating the estimated value.
(2) When determining the amount of the adjustment to claims, the cooperative shall not take into account:
(a) collateral in the case of a loss-making claim where at least one instalment of the principal or accessory is past due for more than 540 days, unless it is collateral by a person under § 2 (d) (1) to (4);
(b) a guarantee on the basis of which, in the event that the debtor fails to repay the claim, the third party for which the claim is at risk or against whom the claim would be included in the claims at risk should be satisfied; it is, in particular, a guarantor, a sub-borrower in the lien for a claim, a currency exchange in the foreign exchange note or an exhibition of a note in his possession, provided that the claim of the cooperative is secured by a currency issued by a third party.
Provisions for off-balance sheet items
(1) The cooperative shall constitute reserves for selected off-balance-sheet items in accordance with accounting methods.
(2) The cooperative reserve shall continuously assess the adequacy and justification of the reserves created for off-balance-sheet items and adjust their amount.
Information obligations
The cooperative reserve shall comply with the information obligation on claims, adjustments and provisions made on the form, the model of which is annexed to this decree, with regard to the institution supervising the cooperative advances pursuant to Section 22 (1) of the Act.
Date of implementation of the information obligation
The co-operative shall submit the report in the form of an information obligation pursuant to Article 10 as at 31 March, 30 June, 30 September and 31 December of the calendar year at the latest by the 21st day of the following calendar month and as at the date specified in the notice (Article 27 of the Law) on the basis of that call.
Efficacy
This Decree shall enter into force on 1 October 2005.
Minister:
Sobotka v. r.
Annex to Decree No 319 / 2005 Coll.
Information obligation form
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Regulation Information
| Citation | Decree No. 319 / 2005 Coll., laying down rules on the classification of claims and the creation of adjustment items and reserves of savings and credit cooperatives |
|---|---|
| Regulation Type | Order |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 12.08.2005 |
|---|---|
| Effective from | 01.10.2005 |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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