Commercial Loan Charge-Off Rate

Benchmarking Report

Commercial Loan Charge-Off Rate

This PDF report includes benchmarking data (in a visual, chart-based format), an comprehensive KPI definition, characteristics of high performers and technical details on measuring Commercial Loan Charge-Off Rate. Purchase and download this easy-to-understand, presentation-ready report immediately to compare performance levels, set attainable performance targets, and push towards best-in-class performance for this KPI.

What is Commercial Loan Charge-Off Rate?

The dollar amount (remaining balance) of commercial loans that must be charged-off (i.e., delinquent loans unlikely to be collected) by the organization divided by the average dollar amount of commercial loans in the organization's servicing portfolio (i.e., total loans outstanding) over the same period of time, as a percentage.

Why should Commercial Loan Charge-Off Rate be measured?

Commercial Loan Charge-Off Rate is a vital risk-related measure of the organization's loan underwriting methods, as well as an indicator of potential losses due to loan charge-offs. Loan charge-offs are typically publicly reported (in regulatory filings, etc.), placing increased scrutiny and importance on this measure, as poor performance may impact the bank's overall market standing. This KPI is a lagging indicator of commercial loan underwriting quality, risk appetite, and the overall risk associated with commercial lending practices. High values for Commercial Loan Charge-Off Rates can indicate that the servicing portfolio contains a large number of high-risk options for financial institutions, which increases the likelihood of not collecting on numerous outstanding commercial loans. The increased likelihood of default negatively effects the financial institution's profitability and may lead to a need to access loss reserves in order to compensate for losses on uncollected commercial loans.

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