dissapointing, page-18

Crazymark

Re “We are seeing the big corporate defaults (ABC, Centro, BNB, Commander) in these numbers, but IMHO, plenty of commercial property and consumer (credit cards etc) to follow as economy deteriorates. Under IFRS accounting policy that the banks use, credit charges are only for incurred loss, so no forward recognition of expected credit losses is allowed.”

Your comments on the timing and recognition of bad debts are incorrect. The Australian Accounting Standard AASB 139 has the requirements for the recognition of impaired loans and receivables. Bad debt losses do not need to be “incurred” before they are recognised in NPAT, what is required is an “impairment event.” This definition includes credit rating downgrades, debtor arrears and of course insolvency. The banks are already reflecting anticipated future bad debt losses related to debtor groups like credit cards. These anticipated losses are being reflected in line with debtor arrears (actuals and trends) as collective provisions.

For Westpac, a breakdown of impaired assets is covered in notes 12-17 in the HY report.