12. IMPAIRMENT CHARGES ON LOANS AND RECEIVABLES
Group |
2013 €'000 |
2012 €'000 |
|---|---|---|
| Balance at the beginning of the year | 3,263,422 | 2,751,266 |
| Increase in specific provision | 847,227 | 1,016,647 |
| Release of specific provision | (295,026) | (419,189) |
| Increase/(release) in collective provision | 309,637 | (85,302) |
| Total movement in provision | 861,838 | 512,156 |
| Balance at the end of the year | 4,125,260 | 3,263,422 |
| Recognised in the income statement | 914,345 | 517,841 |
| Recognised against loans and receivables | (52,507) | (5,685) |
| 861,838 | 512,156 | |
| Analysed as: | ||
| Specific impairment | 3,302,773 | 2,750,572 |
| Collective impairment | 822,487 | 512,850 |
| 4,125,260 | 3,263,422 |
The impairment provision for each specifically assessed debtor connection is calculated as the difference between the carrying value of each debtor connection's total loans and the present value of expected future cash flows for the connection. The increase in the specific provision in 2013 reflects principally the deterioration in the expected cash flows for debtor connections where there has been a reduction in the projected disposal value of property collateral to reflect NAMA's current expectations based on external market conditions and available evidence.
For a number of debtor connections there has been an improvement in the expected cash flows resulting principally from an increase in the expected disposal value or accelerated disposal of property collateral, which has resulted in a release in the impairment provision for these debtor connections.
For the purpose of the collective assessment, NAMA has calculated an impairment loss rate using a sample of cash flows which were prepared in respect of the Participating Institutions managed debtors. This rate is then applied to the Participating Institution managed portfolio to determine the level of collective impairment provision required. The revised method has resulted in an increase in the collective impairment provisioning rate from 12.4% to 23.0% and an increase in the collective provision of €310m to a total collective provision of €822m.
Further information on the impairment of loans and receivables is included in Note 3, Critical accounting estimates and judgements, Note 20, Loans and receivables and Note 23, Credit Risk.