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Non-performing Loan
A non-performing loan (NPL) is a bank loan that is subject to late repayment or is unlikely to be repaid by the borrower in full. Non-performing loans represent a major challenge for the banking sector, as it reduces the profitability of banks, and is often presented as preventing banks from lending more to businesses and consumers, which in turn slows down economic growth (although this theory is disputed). In the European Union, the management of the NPLs resulting of the global financial crisis of 2008 has become a politically sensitive topic, culminating in 2017 with the decision by the Council to task the European Commission to launch an action plan to tackle NPLs. The action plan supports the fostering of a secondary market for NPLs and the creation of Asset Management Companies (aka bad bank). In December 2020, this action plan was revised in the wake of the Covid19 pandemic crisis. Definition Non-performing loans are generally recognised as per the following criteria: * Pay ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Loan
In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that debt until it is repaid as well as to repay the principal amount borrowed. The document evidencing the debt (e.g., a promissory note) will normally specify, among other things, the principal amount of money borrowed, the interest rate the lender is charging, and the date of repayment. A loan entails the reallocation of the subject asset(s) for a period of time, between the lender and the borrower. The interest provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice, any material object might be lent. Ac ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bad Bank
A bad bank is a corporate structure which isolates illiquid and high risk assets (typically non-performing loans) held by a bank or a financial organisation, or perhaps a group of banks or financial organisations. A bank may accumulate a large portfolio of debts or other financial instruments which unexpectedly become at risk of partial or full default. A large volume of non-performing assets usually make it difficult for the bank to raise capital, for example through sales of bonds. In these circumstances, the bank may wish to segregate its good assets from its bad assets through the creation of a bad bank. The goal of the segregation is to allow investors to assess the bank's financial health with greater certainty. A bad bank might be established by one bank or financial institution as part of a strategy to deal with a difficult financial situation, or by a government or some other official institution as part of an official response to financial problems across a number of inst ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Prudential Regulation
Prudential regulation is a type of financial regulation that requires financial firms to control risks and hold adequate capital as defined by capital requirements, liquidity requirements, by the imposition of concentration risk (or large exposures) limits, and by related reporting and public disclosure requirements and supervisory controls and processes. Prudential regulation can be split into microprudential regulation that focuses on the individual firms and making sure that they can withstand shocks and macroprudential regulation that looks at the whole financial system and systemic risk. Some countries have separated their financial regulators along the lines of prudential/consumer protection such as the UK with the Prudential Regulation Authority or in Australia with the Australian Prudential Regulation Authority The Australian Prudential Regulation Authority (APRA) is a statutory authority of the Australian Government and the prudential regulator of the Australian ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Capital Requirement
A capital requirement (also known as regulatory capital, capital adequacy or capital base) is the amount of capital a bank or other financial institution has to have as required by its financial regulator. This is usually expressed as a capital adequacy ratio of equity as a percentage of risk-weighted assets. These requirements are put into place to ensure that these institutions do not take on excess leverage and risk becoming insolvent. Capital requirements govern the ratio of equity to debt, recorded on the liabilities and equity side of a firm's balance sheet. They should not be confused with reserve requirements, which govern the assets side of a bank's balance sheet—in particular, the proportion of its assets it must hold in cash or highly-liquid assets. Capital is a source of funds not a use of funds. Regulations A key part of bank regulation is to make sure that firms operating in the industry are prudently managed. The aim is to protect the firms themselves, their custo ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Non-performing Asset
A non-performing loan (NPL) is a bank loan that is subject to late repayment or is unlikely to be repaid by the borrower in full. Non-performing loans represent a major challenge for the banking sector, as it reduces the profitability of banks, and is often presented as preventing banks from lending more to businesses and consumers, which in turn slows down economic growth (although this theory is disputed). In the European Union, the management of the NPLs resulting of the global financial crisis of 2008 has become a politically sensitive topic, culminating in 2017 with the decision by the Council to task the European Commission to launch an action plan to tackle NPLs. The action plan supports the fostering of a secondary market for NPLs and the creation of Asset Management Companies (aka bad bank). In December 2020, this action plan was revised in the wake of the Covid19 pandemic crisis. Definition Non-performing loans are generally recognised as per the following criteria: * Pa ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Securitization
Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt obligations (CDOs). Investors are repaid from the principal and interest cash flows collected from the underlying debt and redistributed through the capital structure of the new financing. Securities backed by mortgage receivables are called mortgage-backed securities (MBS), while those backed by other types of receivables are asset-backed securities (ABS). The granularity of pools of securitized assets can mitigate the credit risk of individual borrowers. Unlike general corporate debt, the credit quality of securitized debt is non- stationary due to changes in volatility that are time- and stru ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Tax Deferral
Tax deferral refers to instances where a taxpayer can delay paying taxes to some future period. In theory, the net taxes paid should be the same. Taxes can sometimes be deferred indefinitely, or may be taxed at a lower rate in the future, particularly for deferral of income taxes. Corporate tax deferral Corporations (or other enterprises) may often be allowed to defer taxes, for example, by using accelerated depreciation. Profit taxes (or other taxes) are reduced in the current period by either lowering declared revenue now, or by increasing expenses. In principle, taxes in future periods should be higher. Income tax deferral In many jurisdictions, income taxes may be deferred to future periods by a number of means. For example, income may be recognized in future years by using income tax deductions, or certain expenses may be provided as deductions in current rather than future periods. A 2010 study documents the large extent to which U.S. taxpayers accelerate their deductible sta ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Andrea Enria
Andrea Enria (born 3 July 1961) an Italian economist who currently serves as Chair of the European Central Bank's Supervisory Board, as of 1 January 2019. He previously served as the chairperson of the European Banking Authority (EBA) between 2011 and 2019. Early life and education Enria was born in the port of La Spezia and was raised by his father and grandparents after his mother’s early death. He studied economics at Bocconi University and holds a M. Phil. degree in Economics from the University of Cambridge. Career After his studies, Enria joined the Bank of Italy as an economist specialising in banking analysis, competition and regulation. In 1995, he briefly served as adviser to Italian Prime Minister Lamberto Dini. From 1999 until 2004, Enria worked on banking supervision at the European Central Bank in Frankfurt. In 2004, he became the first secretary general of the newly established Committee of European Banking Supervisors (CEBS), based in London. From 2008 to 201 ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
European Commission
The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body of about 32,000 European civil servants. The Commission is divided into departments known as Directorates-General (DGs) that can be likened to departments or ministries each headed by a Director-General who is responsible to a Commissioner. There is one member per member state, but members are bound by their oath of office to represent the general interest of the EU as a whole rather than their home state. The Commission President (currently Ursula von der Leyen) is proposed by the European Council (the 27 heads of state/governments) and elected by the European Parliament. The Council of the European Union then nominates the other members of the Commission in agreement with the nominated President, and the 27 members as a team are then ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Narasimham Committee On Banking Sector Reforms
From the 1991 India economic crisis to its status of third largest economy in the world by 2011, India has grown significantly in terms of economic development, so has its banking sector. During this period, recognizing the evolving needs of the sector, the Finance Ministry of the Government of India set up various committees with the task of analyzing India's banking sector and recommending legislation and regulations to make it more effective, competitive and efficient. Two such expert Committees were set up under the chairmanship of Maidavolu Narasimham. They submitted their recommendations in the 1990s in reports widely known as the Narasimham Committee-I (1991) report and the Narasimham Committee-II (1998) Report. These recommendations not only helped unleash the potential of banking in India, they are also recognized as a factor towards minimizing the impact of global financial crisis starting in 2007. Unlike the dirigist era up until the mid-1980s, India is no longer ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Default (finance)
In finance, default is failure to meet the legal obligations (or conditions) of a loan, for example when a home buyer fails to make a mortgage payment, or when a corporation or government fails to pay a bond which has reached maturity. A national or sovereign default is the failure or refusal of a government to repay its national debt. The biggest private default in history is Lehman Brothers, with over $600 billion when it filed for bankruptcy in 2008. The biggest sovereign default is Greece, with $138 billion in March 2012. Distinction from insolvency, illiquidity and bankruptcy The term "default" should be distinguished from the terms "insolvency", illiquidity and " bankruptcy": * Default: Debtors have been passed behind the payment deadline on a debt whose payment was due. * Illiquidity: Debtors have insufficient cash (or other "liquefiable" assets) to pay debts. * Insolvency: A legal term meaning debtors are unable to pay their debts. * Bankruptcy: A legal finding tha ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
National Asset Management Agency
The National Asset Management Agency (NAMA; ga, Gníomhaireacht Náisiúnta um Bhainistíocht Sócmhainní) is a body created by the government of Ireland in late 2009 in response to the Irish financial crisis and the deflation of the Irish property bubble. NAMA functions as a ''bad bank'', acquiring property development loans from Irish banks in return for government purple debts bonds, ostensibly with a view to improving the availability of credit in the Irish economy. The original book value of these loans was €77 billion (comprising €68bn for the original loans and €9bn rolled up interest), and the original asset values to which the loans related was €88bn, with there being an average Loan To Value of 77% and the current market value is estimated at €47 billion. NAMA is controversial, with politicians (who were in opposition at the time of its formation) and some economists criticising the approach, including Nobel Prize-winning economist Joseph Stiglitz who has ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
