What is a non -paying asset?
When a financial institution, including a bank, does not earn money for a product, property or loan, becomes an inefficient asset. The economic conditions that are limited can contribute to the fact that the asset becomes an impossible asset. After the investor or banking client does not make payments of this financial entity for a certain period of time, as is 90 days, the asset becomes a problem and is likely to fall into the category of non -evolved assets.
Financial institutions that deal with loan issuing, such as mortgages, usually earn a certain amount of money every quarter to protect against non -fulfillable asset. These funds can go to the portfolio of provision or to the loan portfolio for the problem. The greater the amount of money that is earmarked for the provision, the greater the emphasis, which is likely to be under the regional economy. As the economic conditions improve, the bank expects that consumers are less likely to get into the failure and create an impossible asset of the AvelicsThe portfolio can decrease.
When the bank extends any type of loan, including a mortgage, the risks associated with the potential failure of the agreement are taken into account. In the worst scenario, the bank will have to charge a non -paying asset and accept that no money will be earned, as expected before. As the number of problem assets decreases and the number of high -quality assets increases, improves the total profitability image in the bank. Less money must be devoted to driving and solving problems concerning unfulfilled assets.
tangible assets such as real estate and property can certainly become unfulfilled assets. Several factors can contribute to becoming an unfulfilled asset. Of course, the first feature is missed payments. Also, if there is any collateral to support a loan, and if this collateral is Worméně than a property balance, the asset is closer to not fulfill. If the soil becomesLess than a balance on a non -paid loan may need to be written off.
As soon as the bank or other creditor has accumulated uniform assets, these assets can be sold. If the problem assets are a piece of assets, the owner can only decide to sell them to interpret them. The seller may have to sell a property at a discount price and earn anything but an accounting value, a value of assets in the balance sheet that is less depreciation or commitment to asset.