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Explanation: Being insolvent is not being able to re-pay one's loans.
Banks use a loss reserve fund to cover their losses in case of debtors insolvency.
The difference between loan to value of real estate for example, factored with the debtors estimated ability to repay, would determine how much the bank puts aside.
Debtors ability to repay is calculated among other things, by taking into account their credit history, current job time, age and salary. This also usually determines the interest rate that the Bank will extend to the debtor for the loan.
adj : unable to meet or discharge financial obligations; "an insolvent person"; "an insolvent estate" [ant: solvent] n : someone who has insufficient assets to cover their debts [syn: bankrupt]
Rosanna Palermo Local time: 00:49 Works in field Native speaker of: Italian, English PRO pts in category: 31