The "provision for loan and lease losses":
A) are the realized losses from the previous accounting period.
B) represents management's estimate of potential lost revenue from bad loans.
C) determined by the Federal Reserve for all banks.
D) does not affect net income.
E) is another name for a bank's "burden."

Question

Quizplus · Accepted Answer

The provision for loan and lease losses represents the estimated potential lost revenue from bad loans, based on management's analysis and assumptions of expected future losses. It is not necessarily the realized losses from the previous accounting period, determined by the Federal Reserve, or a bank's burden. The provision for loan and lease losses does affect net income, as it is a key expense for banks in managing credit risk.

The "Provision for Loan and Lease Losses