The Bank of England (BoE) published the Statistical Notice 2021/08 that offers guidance on reporting of bad and doubtful debts for loans under the government coronavirus loan schemes on the statistical reporting Forms AL, BE, BT, ER, LN, and PL. The guidance covers various loan schemes, including the Coronavirus Large Business Interruption Loan Scheme (CLBILS), the Coronavirus Business Interruption Loan Scheme (CBILS), the Recovery Loan Scheme, and the Bounce Back Loan Scheme (BBLS).
At a high level, the following are the key highlights of the reporting guidance for the aforementioned statistical collections:
- For all forms, if a loan made under one of the government coronavirus loan schemes is recognized as a bad and doubtful debt, reporter should only report a provision and subsequent release, write-off, and recovery for the proportion of the loan that is not guaranteed by the government
- For all forms, in addition to the above, loans recognized as bad and doubtful debts should continue to be reported as an outstanding balance against the original borrower until such time as the government guarantee releases the outstanding obligation. At that point, the reduction in outstanding balance should be treated as an "other adjustment" for an amount equivalent to the value of the government guarantee, in line with the definition of "other adjustments" outlined in the Form LN definitions. The remainder of the reduction in outstanding balance should be treated as a write-off.
- On Form PL, reporting interest received on these loans until written-off should be continued as described in the previous statistical notice on reporting of loans made under government coronavirus loan schemes on the Form PL (Statistical Notice 2020/06)
- On Form ER, any loan interest received from UK households and corporates should be reported as usual, but they should exclude any interest paid by the UK government under the loan schemes or as guarantor of the loan under the scheme once it has been written off
Regarding reporting of Form ER, at the point when the government coronavirus loan schemes were introduced in 2020, reporters of Form ER were advised that sectoral reporting of interest receivable should be consistent with the sectoral reporting on the equivalent balance sheet item, but should exclude any interest paid by the UK government (which is the case in the first year for two of the schemes). This is different from the reporting requirements on Form PL on the treatment of interest paid by the UK government under the schemes. For Form PL reporting, when a risk of loss to a loan guaranteed by CBILS, CLBILS, or Recovery Loan Scheme is identified, reporters should only provision for 20% of the finance that is not guaranteed by the government. Therefore either PL20AA (specific provisions) or PL20AD (general provisions) would increase by up to 20% of the value of the loan or provision. Furthermore, as loans under the BBLS are fully guaranteed by the government, they should not be reported as provisions when a risk of loss is identified. Even after a loan has been provisioned for, as long as interest continues to accrue, the full amount of interest should be reported as described in the Statistical Notice 2020/06 on reporting of loans under government coronavirus loan schemes on the Form PL.
Keywords: Europe, UK, Banking, Reporting, CLBILS, CBILS, BBLS, Credit Risk, Form ER, Form PL, NPLs, Statistical Reporting, COVID-19, Form AL, Form BT, Form BE, Form IN, Loan Guarantee, BoE
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