12/04/2021 · Loan loss provisions at major European banks should record a moderate decline in 2021 after peaking in the immediate aftermath of the COVID-19 outbreak in 2020, but are not likely to drop below pre-pandemic levels before 2022, credit rating analysts degree of loan-loss provisioning is an important quantitative indicator for assessing the health of the banking sector. Normally, banks should set aside loan-loss provisions to take account of the likelihood that some loans may not be repaid in full. In practice, in most euro area countries, accounting provisions are typically made once the loan has genuinely becomeAlready in Europe UniCredit — the biggest bank in Italy, the eurozone’s most fragile banking market — has announced it will set aside an extra €900m to cover potential loan losses. Credit ;· After a notable first-quarter drop, loan loss provision levels at Europe's largest banks are expected to continue declining in the second quarter of 2021 and beyond, but lenders will likely hold on to some of their pandemic-related reserves for longer, analysts ;· Booking a provision means that the bank recognises a loss on the loan ahead of time. Banks use their capital to absorb these losses: by booking a provision the bank takes a loss and hence reduces its capital by the amount of money that it will not be able to collect from the client. Banks do not have to book provisions for the full value of a non-performing loan, because they might still receive some repayments from the Loss Provision Definition - are provisions and non-performing loan (NPL) coverage?What are provisions and non-performing loan (NPL) coverage?Loan Loss Provision Definition - ;· We find no evidence of income‐increasing loan loss provisions being positively associated with the auditor–client economic bond. There is no indication that auditor independence is impaired in EU banks. Stronger country regulation is associated with more conservative provisioning before and after the formation of the European Banking Authority.

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