A write-off policy is the internal rule by which a bank or other lender decides when a loan or receivable that it does not expect to recover is removed from its balance sheet, and how that decision is approved and recorded. It turns the accounting requirement into practical criteria: for example, a set number of days past due for unsecured consumer credit, the completion of enforcement over collateral, or the borrower's insolvency.
Under IFRS 9, an entity reduces the carrying amount of a financial asset when it has no reasonable expectation of recovering it, in whole or in part, and the write-off is treated as a derecognition event. The amount is charged against the allowance for expected credit loss already built up. Writing a loan off does not release the borrower: collection may continue under recoveries management. Supervisors expect timely write-offs so that a non-performing exposure does not linger.