CLASSIFICATION OF THE QUALITY OF ASSETS, FORMATION AND EFFECTIVE MANAGEMENT OF LOSS COVER RESERVES IN COMMERCIAL BANKS

Abstract

The process of classifying the quality of assets in commercial banks and forming reserves to cover losses is important in ensuring the financial stability of the bank.  This process involves assessing the riskiness or safety of bank loans and other assets, anticipating potential losses, and setting aside sufficient reserves to cover them.  When classifying the bank's assets, the client's financial condition, payment discipline and liquidity of the credit provision are taken into account.  Reserve allocation practices reduce financial risks, protect bank capital from losses, and promote long-term sustainable development.  Also, formation of reserves in accordance with international financial reporting standards ensures transparency and reliability of banking activities.