THE banking sector will soon adopt a standard for classifying performing and non-performing loans, greatly enhancing the banking supervisor's ability to assess the sector's bad-debt situation.
Hong Kong Monetary Authority deputy chief executive (banking) David Carse said a consultation paper would be issued to banks to set out the categories used for performing and non-performing loans and their respective definitions.
''A sectoral breakdown of bad-debt provisioning will also be requested in the consultation paper to be released next week,'' he said, explaining that banks' exposure to various economic sectors was useful information for prudential supervision.
The authority will draw reference from the loan classification criteria currently used in the US, which divide loans into three types: performing, special mention and non-performing.
Those classified as special mention are loans with some defects, and are likely to deteriorate into non-performing loans.
Non-performing loans are sub-divided into three types - sub-standard, doubtful and loss.