Regulations Governing the Procedures for Bills Finance Companies to Evaluate Assets, Set Aside Loss Reserves, and Handle Non-Performing Credit, Non-Accrual Loans, and Bad Debt Article 5

A bills finance company performing evaluation of its on and off balance sheet credit assets shall classify normal credit assets as Class 1. The remaining unsound credit assets shall be evaluated based on the status of the loan collaterals and the length of time in arrears and classified as the following types of credit assets:1. Class 2, "Special Mention": Where evaluation shows sufficient collateral for the credit assets and the balance of the borrower's guaranteed or endorsed credit has been in arrears for 1 month to 12 months past the maturity date; or where evaluation shows no collateral for the credit assets and the balance of the borrower's guaranteed or endorsed credit has been in arrears for 1 month to 3 months past the maturity date; or where the credit assets have not reached the maturity date but there are other instances of poor creditworthiness of the borrower.2. Class 3, "Substandard": Where evaluation shows sufficient collateral for the credit assets and the balance of the borrower's guaranteed or endorsed credit has been in arrears for over 12 months past the maturity date; or where evaluation shows no collateral for the credit assets and the balance of the borrower's guaranteed or endorsed credit has been in arrears for a period of 3 months to 6 months past the maturity date.3. Class 4, "Doubtful": Where evaluation shows no collateral for the credit assets and the balance of the borrower's guaranteed or endorsed credit has been in arrears for 6 months to 12 months past the maturity date.4. Class 5, "Losses": Where evaluation shows no collateral for the credit assets and the balance of the borrower's guaranteed or endorsed credit has been in arrears for over 12 months past the maturity date; or where evaluation shows the assets to be unrecoverable.For credit assets restructured for installment repayment in conformance with Article 2, paragraph 2, the bills finance company may, within 6 months of establishing a separate contract, perform evaluation and categorize the credit assets based on the borrower's solvency and the status of the collateral. The bills finance company may not classify the assets under Class 1, however, and shall provide evidence to corroborate its classification.