Hilton Tarrant
3 minute read
28 Oct 2020
8:25 am

Covid-19 vs financial crisis

Hilton Tarrant

How banks decide which loans to write off.

Picture: iStock

As at their most recent reporting periods, the country’s five largest retail banks have a total of nearly R80 billion in so-called ‘Stage 3’ expected credit losses from their loan books. This may sound very high, but total retail advances across these banks is somewhere around R2 trillion. Now, what makes current Covid-19/lockdown-related impairments difficult to compare with those booked by the banks in the aftermath of the global financial crisis in 2008/2009, is that the way banks recognise credit losses in their financial statements changed from January 1, 2018. Previously, banks were required to recognise any losses only when...