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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Unlikeliness to pay (UTP)

What is unlikeliness to pay, and how can a loan default before a missed payment?

ONE OF 366 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Unlikeliness to pay is the judgement test for default: a bank must treat a borrower as defaulted, even with every payment up to date, once it considers the borrower unlikely to pay in full without the bank realising its security. Supervisors' rules list events that indicate it: the bank stops accruing interest, raises a specific provision, sells the loan at a material credit loss, agrees a distressed restructuring that forgives or postpones material amounts, or the borrower enters insolvency. The test matters because a borrower paying from a shrinking cash balance, or with money borrowed elsewhere, can stay current until shortly before it fails.

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 non-performing loan is the wider classification; unlikeliness to pay is one of its two triggers, beside 90 days past due.

// WORKED IN

// NEXT TO IT

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