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Loan Review, Provisioning, and Macroeconomic Linkages

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  • International Monetary Fund
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    Abstract

    Loan review is a process routinely used by banks to assess the current value of loan portfolios. Provisioning is a technique to translate loan review results into the balance sheet. It allows for ongoing valuation of loans. Both are core elements of credit risk management and important to prudential oversight. As illustrated in this paper, valuation feeds into indicators of overall bank soundness and key macroprudential indicators. Country practices and recent moves to more forward-looking models are surveyed. Macroeconomic linkages are highlighted, including tax treatment of provisions, variables of the monetary survey, and procyclical aspects of loan valuation systems.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/195.

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    Length: 32
    Date of creation: 01 Dec 2000
    Date of revision:
    Handle: RePEc:imf:imfwpa:00/195

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    Postal: International Monetary Fund, Washington, DC USA
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    Related research

    Keywords: Provisioning; Capital; Banks; credit; collateral; banking; loan classification; loan review; cash accounting; bank behavior; payments; capital adequacy; nonperforming loan; banking supervision; bank supervisors; banking crises; bank for international settlements; retained earnings; banking sector; bank soundness; credit risk management; bank capital; banking distress; banking system; income statement; prices; bank loans; deposit insurance; systemic banking distress; debt restructuring; bank profits; bank examination; bank restructuring; pools; accounting standard; bank of international settlements; banking authority; financial strength; bank balance sheet; accounting practice; pricing; banking regulations; banking structure; bank management; systemic bank restructuring; tier 1 capital; federal deposit insurance; bank capitalization; refinancing; bank profit; bank assets; bank size; bank supervision; banking sector distress; bank of thailand; bank supervisor; bankers; economic condition; bank lending behavior; basel accord; bank lending; external auditor; banking crisis; accounting period; banks ? loan; prudential requirement; payment system; connected lending; amortization; international accounting standard; shares; bank of japan;

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    Cited by:
    1. Mark Illing & Ying Liu, 2003. "An Index of Financial Stress for Canada," Working Papers 03-14, Bank of Canada.
    2. Fofack, Hippolyte L., 2005. "Nonperforming loans in Sub-Saharan Africa : causal analysis and macroeconomic implications," Policy Research Working Paper Series 3769, The World Bank.
    3. Mario Quagliariello, . "Banks' Performance over the Business Cycle: A Panel Analysis on Italian Intermediaries," Discussion Papers 04/17, Department of Economics, University of York.
    4. Inwon Song, 2002. "Collateral in Loan Classification and Provisioning," IMF Working Papers 02/122, International Monetary Fund.
    5. Torsten Wezel & Mario Mansilla & Gustavo Adler, 2009. "Modernizing Bank Regulation in Support of Financial Deepening," IMF Working Papers 09/199, International Monetary Fund.
    6. 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.
    7. Vincent Bouvatier & Laetitia Lepetit, 2006. "Banks'procyclicality behavior : does provisioning matter ?," Cahiers de la Maison des Sciences Economiques bla06035, Université Panthéon-Sorbonne (Paris 1).
    8. Craigwell, Roland C & Elliott, Wayne A, 2011. "Loan loss provisioning in the commercial banking system of Barbados: practices and determinants," MPRA Paper 33426, University Library of Munich, Germany.
    9. Alain Laurin & Giovanni Majnoni, 2003. "Bank Loan Classification and Provisioning Practices in Selected Developed and Emerging Countries," World Bank Publications, The World Bank, number 15157, October.

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