Provisions for Credit Facilities Quiz

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17 Questions

What is the main reason for making provisions for non-performing credit facilities?

To reflect the bank's asset management capability

When should interest overdue for more than 90 days be recognized?

On Cash Basis only

What percentage of the outstanding balance is the specific provision for Doubtful Credit Facilities?

50%

How does making provisions affect the value of assets?

Reduces the value of assets

What is the calculation basis for general provisions?

2% of net assets without specific provisions

What factors affect liquidity according to the text?

Quality of assets, quality of earnings, and earnings retention

Which measure is NOT included in CBN liquidity measures as per the text?

Loan to Deposit Ratio

What does Sensitivity to Market Risk measure, based on the text?

Changes in equity prices

What does the calculation for Gap involve according to the text?

RSA – RSL

Which factor is NOT mentioned as affecting Sensitivity to Market Risk?

Volatile profitability

In the context of liquidity, what are the effects of poor liquidity as per the text?

Reduced profitability or increased losses

What defines a credit as performing according to the text?

Principal and interest payment up to date

In the context of non-performing credit, which condition would classify a credit as non-performing?

Interest payment equal to 90 days interest has been capitalized

How is provision for non-performing facilities determined according to the text?

Based on the extent of deterioration of the credits

What is the rationale behind making provisions for performing credits according to the text?

Performing credits may harbor some risk of losses

When would a credit be classified as sub-standard?

When interest payment is overdue for 60 days

What effect does harmonizing provisioning for assets have according to the text?

Facilitates timely recognition of assets quality deterioration

Test your knowledge on provisions for credit facilities including specific provisions for sub-standard, doubtful, and lost credit facilities. Understand when to recognize interest and principal repayments on a cash basis. Explore the calculation of general provisions based on net assets.

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