What is Named Peril Coverage?

The provision coverage ratio (also known as the "provision adequacy ratio") is the ratio of the use of reserve for bad and bad debts that may actually occur to bank loans. The provision coverage ratio of non-performing loans is an important indicator for measuring the adequacy of loan loss provisions for commercial banks. This indicator reflects the risk of bank loans and the socio-economic environment, integrity and other aspects from a macro perspective. According to the Risk Rating System for Joint-Stock Commercial Banks (Interim), the provision coverage ratio is the ratio of the actual provision for loan losses to non-performing loans. Provision coverage ratio is an important indicator for banks. This indicator examines whether the bank's finances are healthy and whether risks can be controlled.

Provision coverage

According to China's "Bank

This can be analyzed with an extreme example: suppose there are three banks

The provision coverage ratio indicator is a possible reserve for bad and bad debts of a bank loan. It is an aspect of the bank's risk prevention due to prudent management considerations and a quantitative indicator of the authenticity of performance. This ratio should not be less than 100%, otherwise there is insufficient provision and a reserve gap exists. The higher the ratio, the stronger the ability to resist risks. The level of the provision rate should be appropriate to the degree of risk. It should not be too low to cause insufficient provision and an inflated profit; nor should it be too high to cause excess provision and a false decline in profit.

NPL provision coverage is a measure

First, fine-tune the definition of provision coverage. Will provide coverage

The China Banking Regulatory Commission issued a document on October 10, 2010, requesting banks to transfer all off-balance-sheet assets in the previous bank-trust wealth management cooperation business to the table this year and next, and make provisions based on a 150% provision coverage ratio Equipment.

On February 28, 2018, the CBRC issued the Notice on Adjusting the Supervision Requirements for Loan Loss Provisions of Commercial Banks (Yinjianfa (2018) No. 7), clarifying the regulatory requirements for the provision coverage ratio adjustment from 150% to 120-150% The regulatory requirement for loan provision ratio was adjusted from 2.5% to 1.5-2.5%.