METHODOLOGY OF APPROACHES TO ESTABLISHING AND UTILIZATION OF THE LOAN LOSS RESERVES

Reserves for potential losses of loans are formed by the credit agency for the case of potential depreciation of the loan due to the default or inadequate execution by the borrower of his obligations. Some issues of the methodology of establishing and use of loan loss reserves have been reviewed in the article. The purpose of the article is to disclose the composition and the content of methods of reservation for the loans. The scientific result of the article is the proposed typology of the methods of establishing and use of the reserves (method of the current risk assessment, method of statistical risk assessment, method of evaluation based on discounted cash flows) and the disclosure of their contents by components. The achieved results constitute the basis for development of the applied bank reservations for the loans.

loan loss reserves, methods of reservation, risk assessment, banks, bank regulation, credit portfolio, cost of assets, cash flows, discounting, risk