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Re: YanksGhost post# 550903

Saturday, 08/31/2019 8:59:39 AM

Saturday, August 31, 2019 8:59:39 AM

Post# of 796043
The Loan Loss Reserve is comprised for 2 items:
-Allowance for Loan Losses, which are the individually impaired loans that the SA article points out. It's denounced that it's a fraud because it has been swelled with imaginary credit losses due to the flawed accounting rule that began in 2008. Even if they were reserve for real credit losses (the new accounting change in 2020), they are expected losses not realized yet. Thus, it's still a RESERVE and must be deemed Capital.
-Reserve for Guarantee Losses: This is a general reserve of the entire portfolio that you have signaled. This reserve is now empty and the new accounting rule that starts in January 2020 will require to fill it up.
But the point I made is the same. Because you have to sum up both reserves to get the Loan Loss Reserve, and that's TIER 2 Capital for the reason I mentioned before: it absorbs future credit losses.
A reserve is Capital.