Brief description of loan duration & repayment duration

Brief description of loan duration & repayment duration

When working, I encountered three indicators in the use of assets, which are interest-earning assets, loan duration, and repayment duration. I am a little unclear about the meaning. After consulting relevant information, I will make a short summary. There may be mistakes. First put this.

1 duration

Duration, also known as the number of interest-earning months or duration, can be divided into loan duration and repayment duration from the perspective of banks

• (1) Loan duration

  ​ I understand the loan duration as the average time for the expected principal and interest to be generated after the bank lends to the customer

  ​ Loan duration = sum (loan period * loan amount) / sum (loan amount)

• (2) Repayment duration

  Repayment duration is understood as the average time for the bank to recover all principal and interest

  ​Duration of repayment = sum (the period corresponding to the actual settlement date * loan amount)/sum (loan amount (the largest period for unsettled use)) is to calculate the weighted average of the repayment period
  according to the proportion of the loan amount

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If the repayment duration > loan duration, it should be that the asset is overdue

In fact, the shorter the duration, the lower the risk; the longer the duration, the greater the risk.

example

quote

For example:

For the 3-period product, the loan principal is 3,000 yuan, and 1,000 yuan is withdrawn each period, which is (3000x1+2000x1+1000x1)/3000 = 2. This is the 3-phase product with equal principal, and the actual interest-earning months are February.

For 12-period products, the loan principal is 12,000 yuan, and 1,000 yuan is recovered every month, which is (12000x1+11000x1+...)/12 = 6.5, and the actual interest-earning months are 6.5 months.

From this, we can get the number of interest-earning months of the equal-amount principal product = (term + 1) / 2

2 Interest-earning assets

Interest-earning assets are the general term for indicators such as loans and investment assets, deposits with the central bank, and interbank deposits.

Time deposits and unit deposits are the liability business of the bank rather than the asset business.

For banks:

Interest-earning assets = C + M1 + M2 + M3

The meaning of the index here is

M0: current assets that are not overdue, that is, normal assets (or represented by C, taken from Current)

M1: Balance of assets on loan that are 1-30 days overdue at the end of the month

M2: Balance of assets on loan that are 31-60 days overdue at the end of the month

M3: Balance of assets on loan that are 61-90 days overdue at the end of the month

M4: Balance of assets on loan that are 91-120 days overdue at the end of the month

M5: Balance of assets on loan that are 121-150 days overdue at the end of the month

M6: Balance of assets on loan that are 151-180 days overdue at the end of the month

M7: Balance of assets on loan that are 181-210 days overdue at the end of the month

To quote Baidu Encyclopedia:

Interest-earning assets refer to assets formed by financial institutions lending or depositing funds externally on the condition of collecting interest (or implicit interest conditions, that is, although interest is not charged, but its value is affected by the actual interest rate , such as zero-coupon bonds purchased) . Interest-earning assets include foreign exchange interest-earning assets and RMB interest-earning assets.

Quoting Baidu's answer: