Page 117 - Annual Report 2022

55 Banka Kombëtare Tregtare Annual Report 2022

Banka Kombëtare Tregtare Sh.a.
Notes to the Consolidated Financial Statements for the year ended
31 December 2022 (Amounts in USD, unless otherwise stated)

5. Financial risk management (continued)
(b) Credit Risk (continued)

Impaired loans and securities
Impaired loans and securities are loans and securities for which the Bank determines that it is probable that it will be unable to
collect all principal and interest due according to the contractual terms of the loan / securities agreement(s). The Risk Committee
of BKT is engaged with the grading of the customers and their scoring according to the appropriate categories. It decides the
changes of grading and takes the necessary actions according to the monitoring procedures. The Risk Committee grades each
loan according to these factors:

• Ability to Pay
• Financial Condition
• Management ability
• Collateral and Guarantors
• Loan Structure
• Industry and Economics
Past due but not impaired loans

Past due but not impaired loans are those loans and securities, where contractual interest or principal payments are past due, but
the Bank believes that impairment is not appropriate on the basis of the level of security / collateral available and / or the stage
of collection of amounts owed to the Bank.

Allowances for impairment
The Bank establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio and
other financial assets. It relates to the specific loss component for individually significant exposures.
Write-off policy

The Bank writes off a loan / security balance (and any related allowances for impairment losses) with the decision of the Board
of Directors, in accordance with the regulation of Bank of Albania “On Credit Risk Management”. The write-off decision is taken
after considering information such as the occurrence of significant changes in the borrower / issuer’s financial position, such
that the borrower / issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the
entire exposure.