FIN368: Chapter 5 - Problem Loans and Loans Workout

With effect from the financial year beginning from 1st January 2011 onwards, the default period for classifying a loan as impaired by banking institutions will be 6 months.

• True

• False

Impaired loans will be reclassified as non-impaired loans upon full settlement of all arrears in interest or principal.

• True

• False

Loans workout is defined as a mutual agreement between a lender and borrower to renegotiate terms on a loan that is technically in default to avoid foreclosure or liquidation.

• True

• False

A Cooperative workout agreement (CWA) is done at the final stages of loan recovery, which involves negotiation between both parties without resorting to legal action.

• True

• False

The purpose of applying for a court order to declare bankruptcy is to provide an orderly manner in the repayment of debts.

• True

• False

A trustee has been appointed to take care of Maju Holding’s assets. The trustee is responsible for liquidating the assets and dividing proceeds among creditors. Which of the following loan recovery technique represent the situation?

• Reduce Debt to Judgment

• Writ of seizure

• Garnishee order

• Bankruptcy

East Bank has converted borrowers' pledged assets into cash to settle down the loan repayment balance and interest due. Which of the following loan recovery techniques represent the situation?

• Cooperative workout agreement (CWA)

• Collateral liquidation

• Enforcement of judgment

• Reduce Debt to Judgment

ABC Bank has sent the notification email for legal action to collect money by using court judgment due to borrowers’ ignorance on the bank’s proposal for corrective measures. Which of the following loan recovery technique represent the situation?

• Cooperative workout agreement (CWA)

• Collateral liquidation

•  Enforcement of judgment

•  Reduce Debt to Judgment

Mr. Tan received the court order to pay a portion of his employee’s salary to the XYZ bank for loan settlement. The payments were ordered to be taken place regularly until Mr. Tan’s employee’s debt was paid in full. Which of the following loan recovery technique represent the situation?

• Reduce Debt to Judgment

• Writ of seizure

• Garnishee order

• Bankruptcy

Bank ABC has identified customers who have not been paying their loan on time and decided to take action before it becomes worst. Which of the following guidelines issued by Bank Negara Malaysia is suitable in the circumstances?

• Carry out a post-mortem review on significant cases

• Having an effective workout program

• Recognizing reduction in credit quality at an early stage

• Segregating the workout function from the area that originated the credit