What are non-performing assets? Judging from China's legislative practice, there is no unified classification standard and method for what is "benign" assets and what is "bad" assets. Generally speaking, assets are classified according to the methods based on risk, profitability and liquidity. Assets with clear ownership, no serious restrictions and infringement, profitability and strong liquidity are regarded as high-quality assets, and vice versa. Non-performing assets of an enterprise refer to the net loss and potential loss (capital loss) that the enterprise has not yet dealt with, as well as the estimated loss amount of various problem assets that should be provided for asset impairment in accordance with the provisions of the financial accounting system. The non-performing assets of banks mainly refer to non-performing loans, commonly known as bad debts. In other words, the loan issued by the bank cannot recover the principal and interest according to the agreed period and interest rate. Non-performing assets mainly refer to non-performing loans, including overdue loans (overdue loans), sluggish loans (loans overdue for more than two years) and non-performing loans (loans that need to be written off and cannot be recovered). Others include real estate and other real estate portfolios. The classification of non-performing assets by banks in China can be divided into two stages: first, before 1998, all banks were divided into four categories according to the regulations of the Ministry of Finance in the Financial System of Financial and Insurance Enterprises, commonly known as "one excess and two retention", namely "overdue", "sluggish" and "bad debts". The loan loss reserve extracted by this method is only one kind of ordinary bad debt reserve, accounting for 1% of the total loan. Second, after 1998, China classified assets into "normal", "concerned", "secondary", "suspicious" and "loss", that is, "five-level classification". 1In July, 1999, the central bank issued the Notice of the People's Bank of China on fully implementing the guiding principles of five-level loan classification and loan risk classification (for Trial Implementation). According to the regulations of the People's Bank of China, at present, the proportion of special reserve is usually 2% for concern, 25% for sub-category, 50% for suspicion and 100% for loss. The latter three categories are non-performing assets. We used to compare non-performing assets to popsicles, which means that non-performing assets should be sold as soon as possible, otherwise the longer they are held in your hand, the more they will melt like popsicles. Therefore, we suggest reasonable disposal of non-performing assets in various ways. Of course, the disposal of non-performing assets should not only stay at the disposal level of assets themselves. The author believes that solving the problem of non-performing assets is not just a problem of how to dispose of non-performing assets. Finally, to eliminate the risk of non-performing assets, we must eliminate the institutional risk of producing non-performing assets. Disposal of non-performing assets Disposal of assets refers to the activities of realizing and enhancing the value of assets by comprehensively using all means and methods within the scope permitted by law. The scope of asset disposal can be divided into: equity assets, creditor's rights assets and physical assets; Asset disposal methods are divided into ultimate disposal and phased disposal according to asset realization. The final disposal mainly includes bankruptcy liquidation, auction, bidding, agreement transfer and discount realization. Phased disposal mainly includes debt-to-equity swap, debt restructuring, litigation and litigation preservation, debt-to-equity swap, asset replacement, enterprise restructuring, physical asset reinvestment improvement, physical asset leasing, and physical asset investment. Case: Disposal of non-performing assets of a limited company A limited company was established in June 1993. Is a Sino-foreign joint venture industrial enterprise affiliated to a state-owned authorized business unit, mainly producing industrial equipment. As a debtor, the enterprise owes creditors 5 million yuan. The creditor entrusted our lawyer to file a lawsuit, sealed up the company's factory and office building, and applied for enforcement. However, there is no land use right certificate and house property right certificate in the office building and production workshop, so it is too late to deal with it. Enterprises have stopped production for many years, factories are idle, real estate has not been issued with two certificates, and land use fees have not been paid for more than one million. Supplement: Non-performing loans Non-performing loans refer to loans that have been defaulted. Generally speaking, if the borrower fails to repay the principal and interest within three months, the loan will be regarded as a non-performing loan. When banks determine that non-performing loans cannot be recovered, they should write off these loans from profits. When overdue loans cannot be recovered but have not been determined, the provision for bad debt losses shall be listed on the books. Research on the countermeasures of non-performing loans and credit management system of state-owned commercial banks Abstract: First, the assets of state-owned commercial banks are not optimistic. This paper comprehensively expounds the characteristics and causes of non-performing assets of state-owned commercial banks. Through the in-depth analysis of the characteristics of non-performing assets and credit system of ICBC before listing, it is clear that establishing and perfecting the credit system is the main means and measures to control the growth of non-performing loans. Finally, using the method of drawing lessons from and comparing with foreign commercial banks' credit system, this paper puts forward some opinions and suggestions on the reform of credit management system of state-owned commercial banks. Keywords: write-off of capital adequacy ratio of five types of non-performing loans 1. Analysis of the current situation of non-performing loans of state-owned commercial banks in China 1. 1 The basic concept of non-performing loans of state-owned commercial banks in China is that the borrower fails to repay the principal and interest of commercial banks on time according to the original loan agreement, or there are signs that the borrower cannot repay the principal and interest of commercial banks on time according to the original loan agreement. China once defined non-performing loans as the sum of non-performing loans, sluggish loans and overdue loans (that is, one loan exceeds two loans). Since 2002, China has fully implemented the five-level loan classification system, and classified bank credit assets into five categories according to the risk degree of loans: normal, concerned, secondary, suspicious and loss. Non-performing loans mainly refer to subprime, doubtful and loss-making loans. 1.2 estimation of non-performing loans of China Commercial Bank. State-owned commercial banks in China have indeed made a lot of efforts in reducing non-performing loans, such as trying to formulate a strict credit management system, completely procedural reform of credit business, and stipulating indicators for reducing non-performing loans. However, the non-performing assets of state-owned commercial banks are still seriously high, especially the four major state-owned banks. In 2004, the balance of non-performing loans of major commercial banks decreased by 394.6 billion yuan, or 4.56 percentage points, to 13.2%. This ratio has been far higher than the average level of the world banking industry, and the balance and proportion of non-performing loans in the banking system are still at a high level, which not only exceeds the requirements of the Basel Accord, but also falls far short of the requirement that the proportion of non-performing loans in international advanced banks should be kept below 5%. If we consider the relatively conservative figures published by commercial banks in various countries, the asset quality of commercial banks in China can be imagined. Supplement: Non-performing assets Non-performing assets of non-performing assets enterprises refer to the net losses and potential losses (funds) that the enterprise has not yet dealt with, as well as the estimated loss amount of various problem assets for which no provision for asset impairment should be made according to the provisions of the financial accounting system. The non-performing assets of banks mainly refer to non-performing loans, commonly known as bad debts. In other words, the loan issued by the bank cannot recover the principal and interest according to the agreed period and interest rate. Non-performing assets mainly refer to non-performing loans, including overdue loans (overdue loans), sluggish loans (loans overdue for more than two years) and non-performing loans (loans that need to be written off and cannot be recovered). Others include real estate and other real estate portfolios. Non-performing assets refer to assets that cannot participate in the normal operation of enterprises, such as long-term arrears of accounts receivable by debt units, sluggish backlog of materials purchased or produced by enterprises, and non-performing investments. After 1998, China classified assets into "normal", "concern", "secondary", "suspicious" and "loss", that is, "five-level classification". 1In July, 1999, the central bank issued the Notice of the People's Bank of China on fully implementing the guiding principles of five-level loan classification and loan risk classification (for Trial Implementation). According to the regulations of the People's Bank of China, at present, the proportion of special reserve is usually 2% for concern, 25% for sub-category, 50% for suspicion and 100% for loss. The latter three categories are non-performing assets.
Two, corporate customers non-performing loans restructuring methods include
The restructuring methods of non-performing loans of corporate customers include further reduction, change of guarantee, debt transfer and so on. According to the loan restructuring methods of non-performing financial assets, including rearranging, adjusting interest rates, changing guarantees and financing, management companies should abide by laws, regulations, rules and policies when dealing with non-performing financial assets, adhere to openness, fairness, impartiality and competition, and maximize the present value of net recovery.
3. What are the four ways of debt restructuring?
Debt restructuring
Also known as debt restructuring, it refers to the matters that creditors make concessions according to the agreement or ruling reached between them and the debtor when the debtor has financial difficulties.
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Two. Convert debt into capital
Debt-to-equity swaps are handled in the following ways:
1, Limited by Share Ltd
If the debtor is a joint stock limited company, the debtor will stop recognizing the restructured debt when the conditions for derecognition of financial liabilities are met, and the total par value of the shares enjoyed by the creditors due to the abandonment of their creditor's rights will be recognized as capital stock; The difference between the total fair value of shares and share capital is regarded as capital reserve. The difference between the book value of the restructured debt and the total fair value of the shares, as debt restructuring income, is included in the current profit and loss (non-operating income).
2. Other enterprises
When the debtor is another enterprise, if the debtor meets the conditions for derecognition of financial liabilities, the recognition of restructured debts will be derecognized, and the share enjoyed by creditors due to abandonment of creditor's rights will be recognized as paid-in capital; The difference between the fair value of equity and paid-in capital is recognized as capital reserve. The difference between the book value of the restructured debt and the fair value of the equity is taken as the debt restructuring income and included in the current profit and loss (non-operating income).
3. Other circumstances
On the date of debt restructuring, the creditor shall confirm the fair value of the equity as an investment in the debtor. The difference between the book balance of the restructured creditor's rights and the fair value of the equity enjoyed by giving up the creditor's rights shall be offset first. If the impairment provision is insufficient to offset, or if the loss provision is not withdrawn, the difference shall be recognized as a debt restructuring loss. If the debt is converted into capital, the creditor Beijing Opera will give up the equity enjoyed by the creditor at fair value. The relevant taxes and fees incurred shall be handled in accordance with the provisions on the recognition and measurement of long-term equity investment or financial instruments respectively.
For example:
Recently, there is a holding company A, which has a close relationship with local enterprise B and is an independent accounting legal person. By the end of July, 2006, Company B had borrowed 30 million yuan from Company A. Due to the need of business development, through the coordination of both parties, Company A agreed to convert the 30 million yuan of creditor's rights of Company B into capital as an investment from August, and unconditionally give up the creditor's rights of Company B in time, that is, from this month, Company A will obtain the corresponding 30 million yuan of capital equity of Company B by converting creditor's rights into capital.
Suppose the face value of an enterprise's equity is 1 yuan, and its 3 million shares are used to compensate the creditor's rights of company A for 30 million yuan. At that time, the market price of the equity was 9 yuan per share, and the stock market value of 3 million yuan totaled 27 million yuan. The debtor (enterprise) makes the following accounting entries: debit "accounts payable" 30000000; Credit "capital stock" 3000000, credit "capital reserve" 27000000. The accounting entries of the creditor (Company A) are as follows: Debit "long-term equity investment" by 30,000,000; Credit "accounts receivable" 30000000.
Fourth, the way of restructuring non-performing loans.
Legal analysis: 1. Asset reorganization. 2. Debt-to-equity swap. 3. Selling non-performing loans. 4. Securitization.
Legal basis: Guidelines on Due Diligence of Disposal of Non-performing Financial Assets
Article 4 Banking financial institutions and financial asset management companies shall abide by laws, regulations, rules and policies when disposing of non-performing financial assets, and follow the principles of openness, fairness, impartiality, competition and merit-based, and strive to maximize the present value of net recovery.
Article 5 Banking financial institutions and financial asset management companies shall establish comprehensive and standardized rules and regulations on the disposal of non-performing financial assets, improve the decision-making mechanism and operational procedures, and clarify the requirements for due diligence. Regularly or when relevant laws, regulations, rules and policies change, review and revise the rules and regulations on the disposal of non-performing financial assets.
Article 6 Banking financial institutions and financial asset management companies shall take effective measures to ensure that the staff of non-performing financial assets are familiar with and master the laws, regulations, rules and policies related to the disposal of non-performing financial assets and the relevant provisions of these Guidelines.