Dictionary of Banking Terms: substandard
substandard
- bank loan or other interest-earning asset that is protected inadequately by current net worth and paying capacity of the borrower, or the collateral pledged. Loans classified as substandard are characterized by the distinct possibility that the lender will sustain some loss if the deficiencies are not corrected. Some loss of interest is anticipated, or may have already occurred, but loss of principal is considered unlikely.See also adversely classified assets; doubtful loan; loss.
- country risk classification for cross-border loans to a debtor nation, in which the country involved has not met external debt payments, accepted an economic adjustment program recommended by the International Monetary Fund, or negotiated a rescheduling of debts with its creditors.
