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Credit Growth, Problem Loans and Credit Risk Provisioning in Spain

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  • Santiago Fernández de Lis

    (Banco de España)

  • Jorge Martínez Pagés

    (Banco de España)

  • Jesús Saurina

    (Banco de España)

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    Abstract

    This paper analyses the cyclical behaviour of bank credit, loan losses and provisions for loan losses in Spain. These three variables are strongly cyclical in Spain -as in many other countries- and this poses some problems to bank supervisors and regulators. In a context of strong competitive pressures, there is a tendency for loose bank credit conditions in an upturn in view of the low level of contemporaneous non-performing loans. This may contribute to an over-extension of credit.The paper explains in detail the rationale and expected effects of the new loan loss provision the so-called statistical provision- introduced recently by the Banco de España and aimed at an appropriate recording and recognition of expected losses.

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/00/Fic/dt0018e.pdf
    File Function: First version, 2000
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    Bibliographic Info

    Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0018.

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    Length: 34 pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:bde:wpaper:0018

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    Web page: http://www.bde.es/
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    Keywords: banks; behaviour; credit; risk;

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    References

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    1. Crockett, A, 1997. "The Theory and Practice of Financial Stability," Princeton Essays in International Economics 203, International Economics Section, Departement of Economics Princeton University,.
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    3. Sherril Shaffer, 1997. "The winner's curse in banking," Working Papers 97-25, Federal Reserve Bank of Philadelphia.
    4. Suarez, Javier & Sussman, Oren, 1999. "Financial Distress and the Business Cycle," Oxford Review of Economic Policy, Oxford University Press, vol. 15(3), pages 39-51, Autumn.
    5. William R. Keeton & Charles S. Morris, 1987. "Why do banks' loan losses differ?," Economic Review, Federal Reserve Bank of Kansas City, issue May, pages 3-21.
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    9. Petersen, Mitchell A & Rajan, Raghuram G, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 407-43, May.
    10. Robert T. Clair, 1992. "Loan growth and loan quality: some preliminary evidence from Texas banks," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q III, pages 9-22.
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    14. William R. Keeton & Charles S. Morris, 1988. "Loan losses and bank risk-taking: is there a connection?," Research Working Paper 88-04, Federal Reserve Bank of Kansas City.
    15. Keeley, Michael C, 1990. "Deposit Insurance, Risk, and Market Power in Banking," American Economic Review, American Economic Association, vol. 80(5), pages 1183-1200, December.
    16. Risto Murto, 1994. "Finnish banking crisis : can we blame bank management?," Finnish Economic Papers, Finnish Economic Association, vol. 7(1), pages 56-68, Spring.
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    19. Richard E. Randall, 1993. "Lessons from New England bank failures," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 13-35.
    20. Hyman P. Minsky, 1992. "The Financial Instability Hypothesis," Economics Working Paper Archive wp_74, Levy Economics Institute.
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    Cited by:
    1. Laeven, Luc & Majnoni, Giovanni, 2001. "Loan loss provisioning and economic slowdowns : too much, too late?," Policy Research Working Paper Series 2749, The World Bank.
    2. Grigori Fainstein & Igor Novikov, 2011. "The role of macroeconomic determinants in credit risk measurement in transition country: Estonian example," International Journal of Transitions and Innovation Systems, Inderscience Enterprises Ltd, vol. 1(2), pages 117-137.
    3. Eduardo Levy Yeyati & Alejandro Micco & Ugo Panizza, 2004. "Should the Government Be in the Banking Business?: The Role of State-Owned and Development Banks," IDB Publications 6684, Inter-American Development Bank.
    4. Hartmann-Wendels, Thomas, 2010. "International einheitliche Bankenaufsicht nach der Finanzmarktkrise," Leasing - Wissenschaft & Praxis, Universität zu Köln, Forschungsinstitut für Leasing, vol. 8(1), pages 53-66.
    5. Man-Keung Tang, 2007. "Private-Sector Financial Liabilities in Advanced Economies," IMF Working Papers 07/118, International Monetary Fund.
    6. Jesús Saurina salas, 2002. "Solvencia bancaria, riesgo de crédito y regulación pública: El caso de la provisión estadística española," Hacienda Pública Española, IEF, vol. 161(2), pages 129-150, June.
    7. Vasiliki Makri & Athanasios Tsagkanos & Athanasios Bellas, 2014. "Determinants of Non-Performing Loans: The Case of Eurozone," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(2), pages 193-206, March.
    8. Mario Quagliariello, . "Banks' Performance over the Business Cycle: A Panel Analysis on Italian Intermediaries," Discussion Papers 04/17, Department of Economics, University of York.
    9. Eduardo Levy Yeyati & Alejandro Micco & Ugo Panizza, 2004. "¿Debe el gobierno participar en la actividad bancaria? El papel de la banca propiedad del Estado y de la banca de fomento," Research Department Publications 4380, Inter-American Development Bank, Research Department.

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