184. When assessing the creditworthiness of borrowers in the case of shipping finance, in addition …

When assessing the creditworthiness of borrowers in the case of shipping finance, in addition to the general provisions on the creditworthiness assessment set out in Section 5.2.5 and Section 5.2.6, institutions should apply the specific criteria set out in this section. In particular, institutions should assess the following:

• a. the vessel’s earnings to costs (operation expenses, including insurance, wages, maintenance, lubricants and interest cost) ratio;
• b. the ratio of the vessel’s current age to its expected useful life;
• c. characteristics of the borrower’s fleet in relation to the global fleet population (the size of the new build activity, the number of vessels laid up, the number of vessels scrapped for each segment and the age of the vessels will determine over-tonnage and influence freight rates);
• d. vessel valuations with or without haircut (if those are included as a repayment source), to reflect selling costs, the time value of money and uncertainties regarding the liquidity and marketability of the asset, unless single valuations are not possible if vessels are operated as part of a larger fleet with widely different types of earnings.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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