Advanced Search
MyIDEAS: Login

The provisioning experience of the major UK banks: a small panel investigation

Contents:

Author Info

  • Darren Pain
Registered author(s):

    Abstract

    Using panel regression analysis, the factors that may help to explain increases in loan-loss provisions for the major UK banks are investigated. Explanatory variables reviewed include aggregate variables such as GDP growth as well as bank-specific factors such as the composition of the loan portfolio. The main findings are that a number of macroeconomic variables can indeed inform about banks' provisions, in particular real GDP growth, real interest rates and lagged aggregate lending growth. Bank-specific behaviour is also important - increased lending to riskier sectors, such as commercial property companies, has generally been associated with higher provisions.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/2003/wp177.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Bank of England in its series Bank of England working papers with number 177.

    as in new window
    Length:
    Date of creation: Feb 2003
    Date of revision:
    Handle: RePEc:boe:boeewp:177

    Contact details of provider:
    Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH
    Phone: +44 (0)171 601 4030
    Fax: +44 (0)171 601 5196
    Email:
    Web page: http://www.bankofengland.co.uk/
    More information through EDIRC

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, December.
    2. E P Davis, 1993. "Bank Credit Risk," Bank of England working papers 8, Bank of England.
    3. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    4. Joseph P. Hughes & Loretta J. Mester & Choon-Geol Moon, 2000. "Are Scale Economies in Banking Elusive or Illusive?," Departmental Working Papers 200004, Rutgers University, Department of Economics.
    5. John H. Boyd & Chun Chang & Bruce D. Smith, 1998. "Moral hazard under commercial and universal banking," Working Papers 585, Federal Reserve Bank of Minneapolis.
    6. 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.
    7. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
    8. Freixas, Xavier & Parigi, Bruno M & Rochet, Jean-Charles, 2000. "Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 611-38, August.
    9. Berger, Allen N. & DeYoung, Robert, 1997. "Problem loans and cost efficiency in commercial banks," Journal of Banking & Finance, Elsevier, vol. 21(6), pages 849-870, June.
    10. Allen N. Berger & Gregory F. Udell, 1988. "Collateral, loan quality, and bank risk," Finance and Economics Discussion Series 51, Board of Governors of the Federal Reserve System (U.S.).
    11. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    12. Cavallo, Michele & Majnoni, Giovanni, 2001. "Do Banks provision for bad loans in good times? empirical evidence and policy implications," Policy Research Working Paper Series 2619, The World Bank.
    13. 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.
    14. Simon Kwan & Robert Eisenbeis, 1997. "Bank Risk, Capitalization, and Operating Efficiency," Journal of Financial Services Research, Springer, vol. 12(2), pages 117-131, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Ali, Asghar & Daly, Kevin, 2010. "Macroeconomic determinants of credit risk: Recent evidence from a cross country study," International Review of Financial Analysis, Elsevier, vol. 19(3), pages 165-171, June.
    2. Marcucci, Juri & Quagliariello, Mario, 2008. "Is bank portfolio riskiness procyclical: Evidence from Italy using a vector autoregression," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(1), pages 46-63, February.
    3. Sophocles Vogiazas & Constantinos Alexiou, 2013. "Liquidity And The Business Cycle: Empirical Evidence From The Greek Banking Sector," Economic Annals, Faculty of Economics, University of Belgrade, vol. 58(199), pages 109-126, October -.
    4. Athanasoglou, Panayiotis P. & Daniilidis, Ioannis & Delis, Manthos D., 2014. "Bank procyclicality and output: Issues and policies," Journal of Economics and Business, Elsevier, vol. 72(C), pages 58-83.
    5. Natalia Podlich & Didar Illyasov & Elena Tsoy & Shynar Shaikh, 2010. "The Methodology of Stress Tests for the Kazakh Banking System," Ifo Working Paper Series Ifo Working Paper Nr. 85, Ifo Institute for Economic Research at the University of Munich.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:177. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Team).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.