We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
Identified Losses [Banks & Banking]: A Comprehensive Legal Overview
Definition & Meaning
Identified losses refer to specific financial losses that a bank or other insured depository institution recognizes as chargeable against its income, capital, or general valuation allowances. These losses are determined by evaluations conducted by state or federal examiners during inspections or assessments of the institution. Identified losses can include:
Assets classified as losses
Off-balance sheet items classified as losses
Provisions necessary to maintain adequate general valuation allowances
Liabilities not recorded on the institution's books
Estimated losses from contingent liabilities
Account discrepancies indicating shortages
Table of content
Legal Use & context
Identified losses are primarily relevant in the banking and finance sectors, particularly in regulatory compliance and risk management. They are assessed during examinations by regulatory bodies like the Federal Deposit Insurance Corporation (FDIC) to ensure that banks maintain adequate capital reserves. Understanding identified losses is crucial for financial institutions to manage their financial health and for users who may be involved in banking or lending processes.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A bank undergoes an examination and finds that certain loans are unlikely to be repaid, leading to a classification of these loans as identified losses. The bank must then adjust its capital reserves accordingly.
Example 2: A financial institution identifies discrepancies in its accounts that indicate potential losses not previously recorded. These identified losses must be addressed in its financial statements. (hypothetical example)
Relevant laws & statutes
Identified losses are governed by regulations outlined in Title 12 of the Code of Federal Regulations, particularly 12 CFR 325.2. This regulation details the definitions and requirements for capital maintenance in insured depository institutions.
Comparison with related terms
Term
Definition
Difference
Charge-off
A formal declaration that a portion of a loan is unlikely to be collected.
Identified losses may include potential losses not yet formally declared as charge-offs.
Provision for loan losses
An expense set aside to cover potential future loan losses.
Identified losses are specific items recognized at the time of evaluation, while provisions are estimates for future losses.
Common misunderstandings
What to do if this term applies to you
If you are a bank or financial institution and believe you may have identified losses, it is important to conduct a thorough evaluation of your assets and liabilities. You may want to consult with financial advisors or legal professionals to ensure compliance with regulatory requirements. Additionally, consider using US Legal Forms' templates to assist in documenting and managing these evaluations effectively.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.