Expected credit loss allowance
An amount charged in advance against expected losses on loans and receivables — before the borrower has stopped paying.
How to read the number
For a bank, the movement in this allowance is the fastest read on how the bank itself sees the quality of its book.
When the metric lies
Releasing an allowance created earlier raises profit without bringing in any cash. A strong quarter at a bank is sometimes entirely a release.
Also known as: loan loss provision