Bank Loans written off

[dewdrop]

When banks write off loans does that mean they have failed to collect the debt and will not pursue the borrower or guarantor anymore.

 

[Sunny]

Not necessarily. They will still chase the money and will write back any recovery they might get.

 

[dewdrop]

Thanks Sunny. I feel the expression "written off" gives the wrong impression as people think someone has got off scot free. I am amused how long ago debts were usually classified as either bad or doubtful now they are called all types of fancy names like impaired etc

 

[steviel]

Thanks Sunny. I feel the expression "written off" gives the wrong impression as people think someone has got off scot free. I am amused how long ago debts were usually classified as either bad or doubtful now they are called all types of fancy names like impaired etc

it is nothing sinister or 'smoke and mirrors'. It is just about accounting and how bad loans are presented in the banks accounts (under international accounting standards). an 'impaired' loan would stay as an asset on the balance sheet, but a provision will have probably made against it (a corresponding entry on the liability side of the balance sheet). So everyone can see the amount of crap on the balance sheet!!

When a loan is written off it is removed completely and is no longer reflected in the bank's accounts - the corresponding provision is removed as well (or if a provision has not been taken, then the amount will be deducted from the profit and loss account)

but just because it is written off and no longer visible to the public, doesnt mean that it has been forgotton about, but realistically the bank is likely to not expect any recovery when it writes something off