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P. 90 2018 Pillar 3 Disclosures
Annex
E) Write-off risk: This category includes debt
instruments, in arrears or not, which, after
individual analysis it is considered that there is
a remote chance of recovery due to a noticeable
deterioration or unrecoverable deterioration of the
solvency of the operation or holder. Classification in
this category will entail the recording in the results
of losses for the amount in gross book value of the
operation and the total write-off of the asset.
Loss coverage by credit risk due to insolvency:
A) Coverage for non-performing risk (impaired).
a. Non-performing risk due to non-performing
loans of the holder: Banks will evaluate assets
classified as non-performing due to holder default
in order to estimate loss coverage for credit
risk, taking into account the age of the overdue
amounts, the collateral and personal warranties
received, and the financial situation of the holder
and guarantors. Coverage for non-performing
operations will be subject to an individual or
collective estimate.
The coverage for the following non-performing
operations must be subject to an individual
estimate
i. Coverage for non-performing operations due
to default deemed significant by the bank.
ii. Coverage for non-performing operations that
were identified as low credit risk.
iii. Coverage for non-performing operations that
do not belong to a homogeneous risk group
and, therefore, for which the bank cannot
develop internal methodologies to give a
collective estimate of credit losses of these
operations.
b. Doubtful risk other than due to non-performing
loans of the holder: Coverage for operations
that are non-performing for reasons other than
default should be assessed on an individual basis.
However, when the classification has been done
exclusively by considering automatic factors,
coverage for operations classified in this category
should be assessed as a group. As an alternative
solution to these group coverage estimates,
coverage percentages for risk that is non-
performing for reasons of default, from the same
risk segment, but for younger debts, can be used.
B) Coverage for standard risk (includes special
monitoring): Coverage for operations classified
as standard risk will be subject to collective
estimates and operations classified as standard
risk under special monitoring will be subject to
an individual estimation or collective estimation.
The coverage for the following standard operations
under special monitoring must be subject to
individualised estimates:
i. Coverage for standard operations under special
monitoring that the bank deems significant.
ii. Coverage for operations classified as standard
under special monitoring as a result of an
individual analysis of the operation in which a
factor other than the automatic factors has had
a critical influence.
iii. Coverage for standard operations under special
monitoring that do not belong to a homogeneous
risk group and, therefore, for which the bank
cannot develop internal methodologies to give a
collective estimate of the credit losses of these
operations.
Coverage for all operations for which an individual
estimate is not required will be subject to a
collective estimate. Therefore, the following
operations will be subject to a collective estimate:
i. Those classified as non-performing due to
default (other than those identified as low
credit risk) not considered significant, including
those classified as non-performing due to
default caused by the accumulation of overdue
amounts in other operations with the same
account holder.
ii. Operations classified as non-performing for
reasons other than default (other than those
identified as low credit risk) and only automatic
classification factors are considered.
iii. Those classified as standard operations under
special monitoring that the bank does not deem
significant.
iv. Operations classified as standard under special
monitoring as a result of an individual analysis
A