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A non-performing loan (NPL) is a bank loan that is subject to late repayment or is unlikely to be repaid by the borrower in full. Non-performing loans represent a major challenge for the banking sector, as they reduce profitability. [ 1 ]
The challenge is the large number of non-performing loans in a wide variety of situations with regards to geographical location, type of industry, size and type of problem. If the bad bank does not quickly get control of the loans, a lot of value is lost and the capital requirements of the bad bank can change dramatically.
For instance, there was the observation that most of the non-performing loans were advanced to people who were related to senior board managers. [8] Furthermore, Board of Directors of banks failed to oversee bank accounting and corporate reporting systems as well as the external auditing system due to lack of experience or greed. [9]
Community Bank of Bergen County, NJ Reports Sale of Non-Performing Loan Portfolio MAYWOOD, N.J.--(BUSINESS WIRE)-- Community Bank of Bergen County, NJ announced today the sale of $3.2 million of ...
Lamar Savings and Loan (Austin, TX), led by Stanley Adams, which cost $2 billion to resolve; Vernon Savings and Loan (Dallas, TX), led by Don Dixon, which on resolution had 94 percent of loans non-performing; and; Columbia Savings and Loan (Beverly Hills, CA), led by Thomas Spiegel, was closed in January 1991 at the cost of $3.25 billion. [87]
Loan quality and asset quality are two terms with basically the same meaning. Government bonds and T-bills are considered as good quality loans whereas junk bonds, corporate credits to low credit score firms etc. are bad quality loans. A bad quality loan has a higher probability of becoming a non-performing loan with no return.
Other non-conforming loan types. Hard money loans: A hard money loan is a non-conforming loan providing a borrower with short-term funding. Real estate investors often seek them out because they ...
Banks get assets that have fallen dramatically in value since their mortgage loan was made, and if they sell those assets, they further glut supply, which only exacerbates the situation. To slow or halt the deflationary spiral, banks will often withhold collecting on non-performing loans (as in Japan, and most recently America and Spain). This ...