Provisions and contingent liabilities are provided for in accordance with Communiqué 8 on the Accounting Application Regulation “Standard for Provisions, Contingent Liabilities and Accounting of Assets” except for the specific and general provisions provided for loans and other receivables.
Provisions are recognized when the Bank has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provision for contingent liabilities arisen from past events should be recognized in the period of occurrence. When a reliable estimate of the amount of obligation cannot be made, contingent liability exists. A provision is recognized when it is probable that the contingent event will occur and a reliable estimate can be made.
