Bank of China New Zealand has included a $19.6 million provision for impairment losses, allegedly linked to one loan to troubled insurance firm CBL Corporation.
An article by NZ Herald detailed Bank of China’s latest disclosure statement for the year to December 31, 2018, which states the $32.8 million loan is complex, and its recovery is uncertain. The level of provisioning reportedly increased from $12 million as of December 2017. While the bank did not identify the borrower, the publication pointed to CBL’s administrators’ reports that Bank of China has applied to put CBL into liquidation.
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“The information surrounding the financial condition of the borrower and recoverability of the loan is complex in nature and limited in availability,” Bank of China (NZ) said in its disclosure statement. “Judgment and estimation are required in determining the amount of the provision for impairment loss. The provision for impairment loss on the loan reflects management's best estimate of the expected credit loss and the amount recovered may be more or less than the provision recognized at 31 December 2018.
“However, there’s a high degree of judgment and uncertainty in the provision and the loss ultimately suffered by the bank may be significantly greater or less than the amount provided,” it added.
As of February 22, the insurer’s administrators from KordaMentha advised the hearing date for the liquidation of CBL will be held on May 13. Meanwhile, the watershed meeting will be held no later than May 27.