Suspense accounts

Write off/back
• : A suspense account –
transactions in brs, correspondent
banks and H.O. organs which do not
end within the accounting system.
• The suspense account is used
because the proper account could
not be determined at the time that
the transaction was recorded.

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 It includes:
• Accounts receivable
• Accounts payable
• Inter-branch/ Head office
Payables…etc

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 Reasons for its creation
• Lack of adequate follow-up
• Lack of appropriate control
systems;
• Lack of clear line of responsibility
• Lack of proper categorization

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 Objectives
• Establish an efficient system of
handling.
• To provide guideline on how to clear
them.
• To standardize the follow-up and
write off/back decisions.
• To maintain the asset quality.
• To reflect and report the true and
fair picture
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in the financial
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statements.
• Suspense items on the asset side
should be categorized as long
outstanding item if it remains
unsettled for more than thirty
days .
• suspense items on the liability side
should be considered as long
outstanding item if they remain
unsettled for more than a year.
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• Unusual and high amounts of
outstanding suspense items should
be verified for their authenticity
with the originating organ of the
Bank as soon as they are received
and/or before effecting any
payments.

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• Miscellaneous items that are advanced to
employees of the Bank for purchase of
goods and services or amount utilized in
excess of allowed limits should not in any
way be kept unsettled for more than thirty
days.
• Suspense items denominated in foreign
currency and involving correspondent banks,
across the domestic territory, should not be
kept in suspense without proper follow-up.
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• In order to mitigate the variations arising from
exchange rate fluctuations, upon receipt of
reminder from the Reconciliation Team on
suspense items .
• denominated in foreign currency and are
three months old and above, the Bank
organ holding such items should reclassify
them as Accounts Receivable or Accounts
Payable by converting them into local
currency, applying the initial transaction
exchange rate.
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• Suspense items that may require a
legal proceeding should be dealt
with care. These items may include
any criminal and civil legal cases
involving Banks’ staff as well as
outsiders.
• Any legal advice on suspense items
of fraud nature should be requested
from the appropriate legal advisor
without
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delay. CBE-WRITE OFF/BACK 10
 To minimize the possible
occurrences:
• Check the correctness of particulars
in tickets and claims.
• Check the attachment of necessary
documents.
• Dispatch outgoing credit
summaries timely.
• Return wrong tickets immediately.

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 Credit Summary Processing
Unit’s Responsibility

• is responsible to clear and send

documents timely.
• within three consecutive working
days from the date of receipt.

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 District Offices’
Responsibility
• shall check monthly returns of
each branch and should send a
reminder for items in suspense and
unattended for more than thirty
days.

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 VP-CATS Responsibility

• shall review the summarized

District Level Monthly Suspense
Report and shall give
directions/reminders to District
Mangers .

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Head Office Organs
Responsibility
• whose transactions and/or
accounts are handled by the
Finance process, are responsible to
follow and clear their outstanding
suspense items

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 Accounts and Reconciliation Sub-process’
Responsibility

• For all suspense items denominated in

foreign currency (i.e. outstanding
items on the summary drawing
sheet), strict and timely follow-up is
required and inquires should be sent,
by the latest, within one month of the
date of the transaction (i.e., date of
credit or debit entry to Correspondent
Our Accounts).
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 Branches’ Responsibility

• compile suspense items of

receivable and payable nature
monthly and quarterly and should
report to their respective district
offices within three working days
after the end of each month and a
quarter.

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 provision for suspense accounts
• provision shall be held annually on
the basis of aging of the suspense
accounts under Accounts
Receivable, Foreign Receivable and
Swift Transfers Received.
• The periodic provision shall be
computed on the outstanding
balance of the above-mentioned
accounts as at May 31 at least
every calendar quarter of the year.
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• Such provisions shall be accounted
in the book of accounts of the Bank
centrally by the Accounts and
Reconciliation Sub-Process by
applying the applicable rates.

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NBE Directive
No.SBB/48/2010)
AGE RATE FOR PROVISION

30 days and below 1%

31 days – 90 days 3%

91 days – 180 days 20%

181 days – 365/6 days 50%

Above one year 100%

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 Conditions Precedent for Write-
Off with respect to Receivables

• If a claim against (or receivable from) a

correspondent bank branch within the Bank
or other local banks or entities proves too
difficult to collect for a variety of reasons.
• When a negotiable instrument related to a
foreign transaction is lost in transit and the
correspondent bank dishonors the claim,
• When investigation charges regarding
claims against correspondent banks exceed
the value of such claims
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• investigation charges or the cost of
recovery exceed the value of such
claims.
• When the person who committed
fraud has no property,
• When the value of the property of
the person who committed fraud is
less than the cost of recovery,
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• When the individual who
committed fraud cannot be located
despite every effort made by the
Bank,
• When the person who committed
fraud has no other source of
income to compensate the
damages/loss,
• When the statutory period of
limitation
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elapses
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• When the final appellate court
passes a decision against the Bank
in a lawsuit made to recover lost
receivables.

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 Conditions precedent for Write-
Back with respect to payables
• When a local transfer of money is not
collected by the beneficiary concerned
and remains unclaimed by the remitter
for a period of two years or above.
• When an incoming foreign transfer of
money is not collected by the beneficiary
concerned and is not claimed by the
remitting foreign bank for a period of
two years or more.

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• When an outgoing transfer is not
collected by the beneficiary abroad
and is not claimed by the remitter
for a period of two years or more.
• When CPO and Certified Cheques
Issued remain unclaimed by the
purchaser / concerned beneficiary
for a period of two years or more.

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 Evidentiary Requirements

• Proposals for write-off and write-

back shall be supported by
authentic and sufficient evidence If
the initiating organs find it beyond
their capacity to present
evidentiary documents, their
recommendations should be
backed by strong justification.

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 Communicating Write-Off/Write-
Back Decisions
• Any write-off/write-back approving organ
of the Bank shall communicate the
write-off/write-back decisions within five
days in writing.
• By claiming the approved amount from
the ARSP, recognizing it as an expense
for receivable items, or recognizing it as
an income for payable items.

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 Maintenance of Register Book

• Accounts and Reconciliation sub-

process shall maintain a central registry
of all approved write off and write back.
• All initiating organs shall keep their own
register books for recording all
approved write-off/write back cases
pertinent to the office under
consideration in order to enable them
follow the cases further.
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 Post Write-Off Follow-Up

• Decision to write-off any claim by the

Bank does not mean that the case is
completely lost.
• When the debtor is found to be solvent,
the organs concerned should
immediately take appropriate steps to
recover the outstanding amount.
• All initiating organs shall be responsible
for close post write off follow-up.
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• keep searching for properties or
other means of redeeming the
Bank’s written-off claims.

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 Post Write-Back Action

• If any claimant appears for a

payable item that has been already
written back, the concerned organs
should reimburse the amount after
verifying the fulfillment of all the
necessary documents relating to
the item.
• such payments shall be approved
by the office that has already
approved the write-back of such
items.
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• the collecting organ shall account the
collected amount against a credit to
Head Office Account (Provision for
Uncollectable Suspense Accounts kept at
the ARSP) through the Credit Summary
system or other means of transfer of the
Bank.
• The Finance Process shall prepare a
detailed report of all write-offs approvals
annually and present it to the President
and the Board at the end of June.
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 Confidentiality

• All matters relating to write-off

cases shall be kept in strict
confidentiality. It shall, therefore,
be a serious breach of code of
conduct entailing severe
administrative measures, as per
Existing code of Ethics Directive of
the Bank.
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Discretionary limits
Approving Organ Write - off Write – back

President Above Not Applicable

Birr.500, 000.-

VP – Finance and Up to Not Applicable

VP – CATS Birr.500, 000.-
VP – Trade Services Up to No Limit
Birr.100, 000.-
Director – ARSP Up to No Limit
Birr.20, 000.-
District Manager Up to No Limit
Birr.20, 000.-

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