The Ministry of Justice has officially registered a new departmental regulation establishing standardized procedures for classifying banking asset quality and forming mandatory loss reserves.
The regulatory framework was formally indexed into the state registry as No. 3937 on September 10, 2026. The freshly enacted guidelines will apply comprehensively across all commercial banking institutions, including microfinance banks and specialized windows operating Islamic banking frameworks.
Under the new directive, banking asset portfolios will be systematically categorized into five distinct tiers based on risk profiles: "standard," "substandard," "unsatisfactory," "doubtful," and "loss."
To insulate institutions from potential defaults, banks must provision respective loss reserves scaled to each category [1, 10, 25, 50, and 100 percent]. Consequently, as the intrinsic quality of an asset degrades, the volume of capital a bank is legally mandated to lock away into loss reserves escalates proportionally.
Asset evaluations will rely concurrently on objective quantitative benchmarks alongside subjective indicators pointing to a low probability of repayment. In cases where evaluating an asset under these two different methods yields conflicting results, the asset must automatically be downgraded to the more severe risk category. Additionally, tailored classification criteria have been mapped out to assess assets extended specifically to other banks, non-bank credit institutions, insurance firms, and leasing organizations.
For restructured loans trying to reclaim a better quality status, borrowers must consistently meet all newly agreed payment obligations and successfully pass a strict probationary period spanning at least 6 or 12 months, depending on the asset type. Moving forward, banks are required to re-evaluate and adjust their total asset reserve pools at least once a month.
Furthermore, effective January 1, 2028, non-performing loans (NPLs) will formally be assigned a "non-accrual" status. Accrued but uncollected interest and related revenues stemming from these problematic assets will be diverted and tracked exclusively within off-balance-sheet accounts.
The ministry emphasized that shifting a toxic asset to off-balance-sheet tracking or writing it off against reserve funds does not absolve the borrower, and their underlying debt liabilities remain legally active.
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