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Non-Performing Loan (NPL)

Is when a counterparty in a financial transaction fails to meet the obligations set aside in a loan contract by failing to pay the principal of the loan or the accompanying interest payments. NPLs are norally an indicator of how badly the bank is performing and therefore how exposed to risks and losses it is. However, what is classed as an NPL greatly depends on the location of the bank used. According to the BASLE Capital Accord “A loan is nonperforming when payments of interest and principal are past due by 90 days or more."

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