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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Probation period (forborne loans)

What is the probation period for a forborne loan, and how long does it last?

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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A probation period is the time a forborne loan, one eased because the borrower was in financial difficulty, must keep performing before the bank may drop its forborne or non-performing label. Supervisors set the lengths and they differ. Under the European reporting rules the UK retained, a non-performing forborne loan waits at least a year from the concession before it can count as performing, then serves a two-year probation, with regular payments, before the forborne flag comes off; in Australia, a restructured loan must meet its new terms for at least six months before it leaves non-performing status. A fresh concession, or new arrears, can restart the clock.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// WHAT IT IS NOT

A cure period in a facility agreement is the time a borrower has to remedy a breach before it becomes an event of default; a probation period is a bank's classification rule that runs after a concession has been granted.

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