Write-off
What is a loan write-off, and how is it different from a provision?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A write-off removes a loan, or part of it, from the bank's balance sheet once the bank judges there is no reasonable prospect of recovering that amount — usually after the security has been realised and the recovery has run its course. The loss has normally been recognised earlier, through the provision; the write-off uses the provision up. A written-off debt can still be owed and still be pursued, and anything recovered later comes back as income.
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 write-off is not a provision: a provision recognises a loss the bank expects while the loan stays on its books; a write-off takes the loan off them.
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