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Finance & Banking vocabulary · Risk Management

Provision

Meaning in finance & banking, with examples

/prəˈvɪʒən/nounCommon term

In finance & banking, provision means: An amount a bank sets aside from its profit to cover expected losses on loans that may not be repaid.

In Turkish: karşılık, kredi zarar karşılığı

How it is used

Used in accounting, credit risk and results announcements. Banks book, build up or release provisions; under IFRS 9 they are based on expected credit losses (ECL). Higher provisions reduce profit.

Example sentences

  1. The bank increased its provisions because of rising defaults in the retail sector.

  2. We released part of the provision after the client repaid its overdue loans.

Common collocations

  • loan loss provision
  • set aside provisions
  • release provisions
  • provision for bad debts
  • provisioning
  • non-performing loanA loan on which the borrower has stopped making payments, usually for 90 days or more, or which is unlikely to be repaid in full.
  • write offTo remove a debt or asset from the accounts because it has no value or will not be recovered, and record the amount as a loss.
  • defaultFailure to make loan or bond payments as agreed. A borrower is usually treated as in default after missing payments for a set period, often 90 days.
  • credit riskThe risk that a borrower or another party will not pay back money it owes on time or in full, causing a loss for the lender.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Risk Management

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This page explains English vocabulary for learners. It is not financial advice.