Bankers complain NBR rules prevent them from cleaning up balance sheets

The accumulation of loans registered as “loss” because debtor companies have no chance of recovery has seen banks complain that “the removal” of debts “from the balance sheet” is burdening them with unnecessary costs, which “artificially” worsen their image.

The solution cited again is to switch to the international financial reporting system (IFRS) – already used in parallel by most banks, but the switch will not occur before 2012, according a decision by the NBR and the Finance Ministry and committed to in the arrangement with the IMF.

“IFRS allows for loans to be removed from the balance sheet under conditions set by the bank based on economic reasons: costs, probability of recovering the money. At present you have to keep the loans in the balance sheet, and allocate provisions, until all legal ways to recoup the money have been exhausted, even if you know that the probability of recovering the money is zero. Switching to the IFRS would help “clean up” balance sheets of non-performing loans and unnecessary costs,” said Vladimir Kalinov, executive vice-president of Raiffeisen Bank, in charge of the Risk division.