The identification and measurement of non-performing assets: a cross-country comparison

FSI Papers  |  No 7  | 
10 April 2018
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 |  54 pages

The prompt identification and accurate measurement of non-performing assets (NPAs) provide confidence to market participants and supervisors in banks' reported asset quality metrics, earnings performance and regulatory capital ratios - all of which are critical to fostering financial stability. Yet NPA identification and measurement practices vary considerably across jurisdictions. This is due to differences in the construct and/or application of relevant accounting standards on problem assets and provisioning. Such differences are exacerbated by variations in the role and design of prudential frameworks that govern NPA identification and measurement. This paper outlines the major differences across key jurisdictions and provides a range of prudential policy options to enhance the identification and measurement of NPAs.