IMPAIRED ASSETS Definition

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IMPAIRED ASSETS, in banking, applies to all problem assets which banks hold, and is not limited to problem loans. In addition to loans, it also captures off- balance sheet exposures and assets which have come onto banks balance sheets through enforcement of security conditions. See IMPAIRMENT OF VALUE.

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YEAR-END is the end of an accounting period; usually a calendar year, but may be a fiscal year. Books are closed at year-end.

LEVERAGE HYPOTHESIS is the theory that managers have incentive to avoid technical default of loan covenants because it could result in increases in the firm's cost of capital.

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