I am a lawyer and I will answer this question.

The main ways banks deal with bad debts are as follows.

First, the relevant departments within the company first carry out the collection. For example, the asset insurance and other departments of some banks are responsible for this kind of work. To put it bluntly, they are the bank’s collection departments, which specialize in collecting these bad debts. However, due to internal debt collection within their own company, due to problems with their own incentive mechanisms, they collect bad debts that are overdue for a relatively short period of time (such as three months) and are easy to collect. They are not so willing to collect debts that exceed this time. Collections were made. After all, some bank employees received disproportionate bonuses for the amount of repayment, and the employees were not very motivated.

Second, bad debts caused by corporate loans are collected by the account manager who originally handled the business. The account manager of some banks brings in a loan business from a company, and then submits it to the credit approval and other departments of the bank's head office for review before disbursing the loan. If there is a bad debt later on in the business and the money cannot be recovered, then the account manager in charge of the business should not do the business. The bank will ask him to collect the bad debt. During this period, the account manager will receive basic salary, bonus, etc. Welfare has nothing to do with him at all. When will he get the money back, when will he start doing business again, and enjoy employee rewards and other benefits.

Third, sell the non-performing assets formed by relatively high-quality corporate loans to the four major asset management companies such as Great Wall and Huarong. These asset management companies are government agencies that specialize in handling such non-performing assets. They first use their own funds or funds raised from bond issuance to buy such asset packages, and then use various methods, such as reselling them to Others will digest these non-performing assets through litigation, debt-for-equity swaps, etc.

Third, outsource it to a law firm. Nowadays, many lawyers are doing this as a profession, and there are also many tenders and tenders for banking and other businesses. Generally, lawyers handle it directly through litigation. Of course, there are also lawyers who issue lawyers' letters, but very few. It is mainly handled through litigation, prosecution, and execution. It is also very time-consuming to wait for a set of procedures to be completed.

Fourth, outsource it to an outside collection company. The bank packages the bad debts into an asset package and hands it over to external collection companies for collection. These collection companies recruit a large number of students who have just left school and cannot find jobs. They wear the robes of asset management companies and work as a certain law firm. In the name of the police, they used phone calls to collect debts and bombarded people who had not paid back the money. Some even come to ask for money. Some people have overdue credit cards and will often receive phone calls asking you to pay back the money. This is what these people do.

In short, banks will deal with these bad debts in various ways.

Banks usually take the following steps:

First, the bank collects the debt by itself, which is the only way for the bank to go through. Of course, many loans are generally mortgaged, so banks' bad debts usually arise from cases of over-mortgage or credit loans. Bank collection mainly involves making phone calls or sending lawyers' letters.

Secondly, banks outsource collection, although many banks do not have such a practice, because such a practice itself contains certain violations. But such situations still exist, and outsourcing collection is not so easy to talk about. For such things, although sometimes the debtor can call the police, many things like debt repayment are more difficult to deal with.

Secondly, if the bank really cannot collect it, the bank will package the debt and sell it. It is difficult to say clearly whether domestic banks have such a situation, because it is not in the banking system. But there is such a situation abroad, and this is how the U.S. subprime mortgage crisis came about.

Finally, if the bank really cannot collect it back, it will perform a bad debt write-off registration. This bad debt write-off registration must be reported to the central bank and should be reflected in the annual financial statements.

Of course, in fact, the bad debt rate of domestic banks has been increasing in recent years, mainly because credit loans are becoming more and more popular. Many of them were credit loans that were unable to be repaid afterward. Most of them were secured in the past. Even if they could not be repaid, there was collateral that could be auctioned off.

According to the current management model, bank loans are generally divided into five levels: normal, special mention, substandard, doubtful, and loss. The last three categories are commonly known as "bank non-performing assets", which is what the questioner said. "Bad debts" and "bad debts." Non-performing loans do not mean that you will not receive a penny. They refer to loans that will still suffer principal losses after the bank has exhausted all means of cash recovery. The proportion of principal losses for substandard, doubtful, and loss loans is between 30% and 30%. Between 100% and higher.

Currently, commercial banks mainly deal with non-performing loans in four main ways: disposal and collection, write-off, packaging and transfer, and debt restructuring.

1. Disposal and collection. According to the contractual agreement between the borrower and the lender, the debtor, as the first source of repayment, has actually breached the contract. The bank will seek a second source of repayment (usually the same debtor, such as a husband and wife, or a guarantor) to fulfill the obligation to repay the principal and interest in the loan contract. . If the debt still cannot be repaid after this, the bank will generally sue the debtor and the guarantor, requesting the execution of the collateral (such as real estate) under the mortgage contract, and at the same time seizing other valuable assets (if any) in the name of the debtor, subject to the execution of the court. The money back is used to pay off the debt.

2. Package transfer. With the development of my country's banking industry, there are more and more non-performing assets in the system, and their disposal and collection consume a lot of manpower and material resources. In 1999, the Ministry of Finance allocated 40 billion to establish four asset management companies: Oriental, Huarong, Cinda, and Great Wall. The management company (state-owned AMC) is used to divest the non-performing debt on the balance sheet of commercial banks. Commonly known as "package transfer", that is, the bad debts originally belonging to the bank are transferred to AMC through the transfer of claims. Later, with the continuous development of domestic finance, the four state-owned AMCs were unable to meet the needs of banks for packaging and transfer. Ten years later, local AMCs were established in various places to transfer the non-performing loans of local banks.

3. Write-off. Regardless of the first or second situation mentioned above, the bank's principal loss is basically inevitable (the package transfer of claims will basically be sold at a discount based on the principal), and this part of the loss will consume the bank's provisions, commonly known as " Provision for bad debts”. Debts after write-off are not reflected as non-performing assets in the balance sheet. They are commonly known as "book-off records". The provisions consumed are the bank's profits. Equivalently, if the non-performing assets after write-off are recovered, they will be directly reflected as The bank's own profits.

4. Debt restructuring. There are many reasons for corporate defaults. Not all debts are malicious defaults. Many business owners only have temporary liquidity difficulties or are affected by upstream and downstream fluctuations in the industry, resulting in temporary liquidity tensions. For such enterprises that have not essentially lost their hematopoietic function, banks can renegotiate the repayment period for the debt with the enterprise, grant a certain grace period, lower interest rates, re-inject liquidity to revitalize the enterprise, etc., so that non-performing assets can return to normal. .

Banks make loan spreads to achieve profit purposes, but because the parties involved in the loans have lost money in business, they are unable to repay the money, which results in non-performing loans.

According to the regulations of the China Banking and Insurance Regulatory Commission, the five-level classification of loans is normal, special mention, rating, doubtful, and loss. A loss loan is a bad debt.

How to deal with non-performing loans? One is to continue to collect the loans and demand repayment through litigation, or to dispose of the mortgaged assets through litigation or require the guarantor to repay the debt. The other is to form a package of non-performing loan assets and sell them collectively. They are usually sold to non-performing asset disposal companies. In order to deal with the non-performing loans of the four major banks, four non-performing loan disposal companies have been established.

In April 1999, the General Office of the State Council forwarded the "Opinions of the People's Bank of China, the Ministry of Finance, and the China Securities Regulatory Commission on the Establishment of China Cinda Asset Management Company". In April 1999, my country's first asset management company —China Cinda Asset Management Company was established in Beijing and received RMB 373 billion of non-performing loans from China Construction Bank.

Then three asset management companies, Huarong, Great Wall and Oriental, were established one after another, corresponding to the other three major state-owned commercial banks - Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of China, which respectively received 407.7 billion, 345.8 billion, and 267.4 billion in non-performing loans, and the four financial asset management companies have received a total of 1.4 trillion in non-performing loans.

The disposal of non-performing loans is an industry with huge profits, and there are also local governments that have funded the establishment of local non-performing loan disposal companies.

In the end, the loan will be put on the books and become a non-performing loan, waiting for the company's operations to improve and looking for opportunities to recover the loan.

Banks’ bad debts are mainly dealt with in two ways. The first is to digest it yourself, that is, according to the five categories of classification, loans that have become bad debts will be made and written off through provisioning and write-off, and then these loans will be transferred to the bank's own non-performing asset disposal company, and the disposal company will slowly collect the loans. , what you can charge is worth it.

The second is to package and sell the corresponding non-performing loans to the four major asset management companies according to the four major financial asset companies established previously, and let them dispose of them. Banks absorb bad loans through provisions and write-offs. Because companies similar to the four major financial asset management companies have been established in many places now. Therefore, there are more channels for disposal.

In order to maximize profits, some asset management companies divide the asset packages into several small packages and sell them to other companies and individuals through package sales. Among them, some new conflicts have also occurred when selling to individuals. For example, it has caused a lot of trouble to the units that owe money to people with gangland nature, and even some vicious incidents have occurred. This needs to be noted.

Of course, some banks dispose through debt restructuring and convert non-performing assets into shares. That is the best way.

According to the current management model, bank loans are generally divided into five levels: normal, special mention, substandard, doubtful, and loss. The last three categories are commonly known as "bank non-performing assets", which is what the questioner said. "Bad debts" and "bad debts." Nonperforming loans do not mean that you will not receive a penny. They refer to loans that will still suffer principal losses after the bank has exhausted all means of cash recovery. The proportion of principal losses in the three categories of substandard, doubtful, and loss loans is between 30% and 30%. Between 100% and higher.

Currently, commercial banks mainly deal with non-performing loans in four main ways: disposal and collection, write-off, packaging and transfer, and debt restructuring.

According to the regulations of the China Banking and Insurance Regulatory Commission, the five-level classification of loans is normal, special mention, rating, doubtful, and loss. A loss loan is a bad debt.

How to deal with non-performing loans? One is to continue to collect the loans and demand repayment through litigation, or to dispose of the mortgaged assets through litigation or require the guarantor to repay the debt. The other is to form a package of non-performing loan assets and sell them collectively. They are usually sold to non-performing asset disposal companies. In order to deal with the non-performing loans of the four major banks, four non-performing loan disposal companies have been established.

In April 1999, the General Office of the State Council forwarded the "Opinions of the People's Bank of China, the Ministry of Finance, and the China Securities Regulatory Commission on the Establishment of China Cinda Asset Management Company". In April 1999, my country's first asset management company —China Cinda Asset Management Company was established in Beijing and received RMB 373 billion of non-performing loans from China Construction Bank.

For this type of loan, there is almost no possibility for the bank to recover the principal and interest. Not only will the principal and interest be lost, but other expenses such as legal fees may also be paid. Loss loans are generally dealt with after litigation procedures.

They are reported for write-off according to the management authority at all levels of the bank, and the relevant responsible persons are dealt with at the same time. There are many reasons for corporate defaults. Not all debts are malicious defaults. Many business owners only have temporary liquidity difficulties or are affected by upstream and downstream fluctuations in the industry, resulting in temporary liquidity tensions. For such enterprises that have not essentially lost their hematopoietic function, banks can renegotiate the repayment period for the debt with the enterprise, grant a certain grace period, lower interest rates, re-inject liquidity to revitalize the enterprise, etc., so that non-performing assets can return to normal. .

Bad debts are called non-performing assets in banks, and banks have many ways to dispose of non-performing assets.

The first is to collect the loans. Now after a non-performing loan is formed, the bank will sue the borrower and the guarantor and enter the litigation process to preserve the statute of limitations. It is also a way to effectively collect the loan.

The second is to write off bad debts, use its own profits to write off, and transfer bad assets from on-balance sheet to off-balance sheet, thereby improving its asset quality. However, the bad debts have not disappeared, and the debtor still has obligation to repay.

The third is to package and dispose of one or more bad debts in a comprehensive manner and sell them to others, which is actually a transfer of creditor's rights.

The fourth is to use assets to offset debts. If the non-performing loan is secured by collateral and the collateral is of sufficient value, then the collateral will be used to offset the loan.

The fifth is debt restructuring, which involves reorganizing the accounts by borrowing new ones to repay old ones, changing borrowers, and debt transfers to turn them into normal loans.

Uninvited. Banks generally follow the following steps to deal with non-performing loans and bad debts:

1. Set aside loan loss reserves. When commercial banks grant loans, they generally allocate loan loss reserves in a certain proportion of the loan balance. For example, the general loan loss reserve is 1%, and there is also a special reserve.

2. Sell bad loans. In the late 1990s, in order to divest the non-performing assets of the four major banks, the state established four asset management companies: Huarong, Great Wall, Cinda, and Dongfang to be responsible for the disposal of non-performing assets of the four major banks. Generally speaking, the four major asset management companies correspond to the four major banks, such as Huarong's counterpart, China Construction Bank.

Although it also includes a series of means such as negotiation, prosecution, asset sales, restructuring, etc., in the final analysis, what is useless is useless, what is not returned is still not returned, and in the end it is often sold to the counterpart at a discount. asset management company.

What can be sold is only discounted. Are you also concerned about the bank’s bad debts? Why don't people care about the bank and the others when they make a lot of money?

My understanding of the bank’s bad debts and bad debts here should be loss loans in the classification of bank loans. For this type of loan, there is almost no possibility for the bank to recover the principal and interest. Not only will the principal and interest be lost, but other expenses such as legal fees may also be paid. The handling of loss loans is generally after litigation procedures, reporting for write-off according to the bank's management authority at all levels, and at the same time dealing with the relevant responsible persons.