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Loan loss provisioning practices of Asian banks

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  • Frank Packer
  • Haibin Zhu
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    Abstract

    In the wake of the Asian financial crisis, many regimes in Asia adopted stricter provisioning requirements, as well as discretionary measures, with the objective of increasing provisioning in good times in response to rising levels of risk. Based on a final sample of 240 banks in 12 Asian economies, the evidence is that countercyclical loan loss provisioning has dominated throughout emerging Asia, most strikingly so in the case of India. Thus, loan loss provisioning did not simply become more conservative at all points in time subsequent to the Asian financial crisis, but actively leaned in a fashion that ameliorated swings in earnings and the macroeconomy.

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    Bibliographic Info

    Paper provided by Bank for International Settlements in its series BIS Working Papers with number 375.

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    Length: 31 pages
    Date of creation: Apr 2012
    Date of revision:
    Handle: RePEc:bis:biswps:375

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    Related research

    Keywords: Loan loss provisioning; financial system procyclicality; international accounting standards; earnings smoothing; macroprudential policy;

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    1. J.A. Bikker & P.A.J. Metzemakers, 2002. "Bank provisioning behaviour and procyclicality," Research Series Supervision (discontinued) 50, Netherlands Central Bank, Directorate Supervision.
    2. Madhusudan Mohanty & Philip Turner, 2010. "Banks and financial intermediation in emerging Asia: reforms and new risks," BIS Working Papers 313, Bank for International Settlements.
    3. Vincent Bouvatier & Laetitia Lepetit, 2006. "Banks' procyclicality behavior : does provisioning matter ?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00115622, HAL.
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