Simultaneous reserves

This method is based on one of the principles of international accounting standards and reporting - the precautionary principle, under which the Bank assesses the credit portfolio in terms of potential losses on credit operations. The Bank establishes and creates a reserve to compensate for possible losses on the total net credit risk of principal, weighted by the corresponding reserve ratio for all types of credit transactions in the national and foreign currencies. The Bank calculates the allowance for standard and custom debt (with maturities of debt on credit transactions) per month, which carried a credit transaction (or agreement on its implementation). Provision made by the bank each month in full, regardless of the size of his income into risk groups according to the actual amount of credit outstanding as of the first day of the month following the reporting period, the deadline for repayment of the monthly balance. The bank holds reserve established by the regulations in force procedure. The basis of the loan portfolio of the banking institutions are "standard" loan operations, and therefore reserve is carried out mainly based reserve ratio, determined from the structure of the loan portfolio. Reserve is used only to cover losses on outstanding debt on the borrowers credit transactions on the principal debt, recovery is impossible. If the reserve has not been established, the loss on credit transactions are debited by the bank's capital, and this may lead to complete loss of the bank's capital and, consequently, to its bankruptcy. In addition to a special reserve bank creates a general reserve, which is the source of net profit. Creating and using the general reserve is regulated by legislation. Most funds are directed to the general reserve for losses on loans that have arisen through the fault of the bank, to reimbursement of legal losses for losses in full, if a special reserve funds for this was not enough. Securitization - a sale of assets of the bank for their conversion into securities, which are then placed on the market. Basically, securitization is used to bank loans, allowing banks to transfer credit risk to other market participants - investors who buy securities. In addition, through securitization, banks can make a transfer of risk, interest rate and risk of early repayment. Topic: Risks in Banking