Loan Loss Provision

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DEFINITION of 'Loan Loss Provision'

An expense set aside as an allowance for bad loans (customer defaults, or terms of a loan have to be renegotiated, etc).

Also know as a "valuation allowance" or "valuation reserve".

BREAKING DOWN 'Loan Loss Provision'

This would be a bank's equivalent of a manufacturing company's allowance for returns on goods sold.

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RELATED FAQS
  1. What metrics can be used to evaluate companies in the banking sector?

    When investment professionals evaluate banks, they are confronted with bank-specific issues such as to how to measure debt ... Read Full Answer >>
  2. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  3. What net interest margin is typical for a bank?

    In the United States, the average net interest margin for banks was 3.03% in the first quarter of 2015. However, this was ... Read Full Answer >>
  4. What are the main benchmarks that track the banking sector?

    The appropriate benchmarks for tracking banking sector performance depend on the type of banking. For instance, commercial-only ... Read Full Answer >>
  5. What are the major categories of financial institutions and what are their primary ...

    In today's financial services marketplace, a financial institution exists to provide a wide variety of deposit, lending and ... Read Full Answer >>
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    The activities and types of clients for an investment bank versus those for a retail bank highlight the primary difference ... Read Full Answer >>

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