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Infection Ratio

In financial terms, the infection ratio refers to the proportion of non-performing or distressed assets relative to the total portfolio of a financial institution.A high infection ratio indicates that a significant portion of the institution’s assets is underperforming or in default, which can signal potential financial instability or the need for stricter risk management. It is an important metric for banks, investors, and regulators when assessing the health of a financial institution's balance sheet.

Example

A bank with a high infection ratio may have a large number of defaulted loans in its portfolio, raising concerns about its financial stability.

Key points

• Measures the proportion of non-performing assets in a portfolio.

• A high infection ratio signals potential financial instability.

• Used to assess the health of financial institutions, especially banks.

Quick Answers to Curious Questions

It helps assess the quality of a bank’s loan portfolio and identifies potential risks associated with high levels of non-performing assets.

A high infection ratio can lead to reduced profitability, increased risk of insolvency, and stricter regulatory scrutiny.

Banks can reduce their infection ratio by improving credit risk management, restructuring bad loans, or selling off non-performing assets.

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