What Should You Keep in Mind in Periods of Low Loss?
Jan 21, 2015
One challenge bankers face in periods of low loss is the ability to objectively maintain reserve levels. If they release reserves without caution, then any future economic downturn could prove costly. In this brief video, a Sageworks consultant shares a few items to keep in mind during periods of low loss.
One of the most important things to consider in periods of low loss is how you’re managing or preparing for the eventual timespan in which losses are going to start occurring again. Obviously your reserve rate should be decreasing in periods of low loss, and you want to make sure that is managed in sort of a conservative fashion so that you can justify the decreases you are making. Or, if you’re not making negative provisions, you want to be able to clearly defend why.