Division — Write-offs/write-downs (3.2B)

In accordance with point (g) of Article 1 of Regulation (EU) No 1071/2013 (ECB/2013/33), ‘“write-down” means the direct reduction of the carrying amount of a loan on the statistical balance sheet owing to its impairment.’ Similarly, in accordance with point (h) Article 1 of the same Regulation ‘“write-off” means a write-down of the full carrying amount of a loan leading to its removal from the balance sheet.’ The effects of write-downs and write-offs should be reported with a negative or positive sign when in net terms they result in a reduction or increase, as applicable, in outstanding amounts. These data are necessary to allow a full reconciliation between net lending and changes in outstanding amounts.

As regards write-offs and write-downs relating to outstanding loans on the balance sheet, data compiled to comply with the minimum requirements of Part 4 of Annex I to Regulation (EU) No 1071/2013 (ECB/2013/33) Table 1A on monthly revaluation adjustments) can be used. However, disentangling the impact of loan write-offs and write-downs on securitised or otherwise transferred loans which are not derecognised requires a separate data extraction from the MFIs' internal databases.

Data on outstanding amounts of eligible loans (items 1 and 4) are in principle corrected for the outstanding amounts of provisions in cases where loans are recorded net of provisions on the statistical balance sheet.

• In cases where participants report items 1.3 and 4.3, data on loan write-offs and write-downs should incorporate the cancellation of past provisions on loans that have become (partly or fully) unrecoverable and, in addition, should also include any losses in excess of the provisions, if applicable. Similarly, when a provisioned loan is securitised or otherwise transferred, a write-off or write-down needs to be recorded that is equal to the outstanding provisions, with the opposite sign, in order to match the change in the value on the balance sheet, corrected for the amounts of provisions and the value of the net flow. Provisions may change over time as a result of new allowances for impairment and loan losses (net of possible reversals, including those that take place when a loan is repaid by the borrower). Such changes should not be recorded in the data reports as part of write-offs/write-downs (as the data reports reconstruct values gross of provisions)^f1.

  Disentangling the impact of loan write-offs and write-downs on securitised or otherwise transferred loans which are not derecognised may be omitted if separate data on provisions cannot be extracted from the MFIs' internal databases.

• Where it is the practice that outstanding amounts of loans are reported net of provisions, but the relevant items (1.3 and 4.3) relating to provisions are not reported (see point 4(a)), write-offs/write-downs must include new allowances for impairment and loan losses on the loan portfolio (net of possible reversals, including those that take place when a loan is repaid by the borrower)^f2.

  It is not necessary to disentangle the impact of write-offs and write-downs on securitised or otherwise transferred loans which are not derecognised if separate data on provisions cannot be extracted from the MFIs' internal databases.

  In principle, these items also cover revaluations arising when loans are securitised or otherwise transferred and the transaction value differs from the nominal amount outstanding when the transfer takes place. These revaluations must be reported, where identifiable, and should be calculated as the difference between the transaction value and the nominal amount outstanding at the time of the sale.

  For additional information, see Part 4 of Annex I to Regulation (EU) No 1071/2013 (ECB/2013/33) and Section 1.6.3.3 of the Manual on MFI balance sheet statistics.