Do Dynamic Provisions Enhance Bank Solvency and Reduce Credit Procyclicality? a Study of the Chilean Banking System
AbstractDynamic provisions could help to enhance the solvency of individual banks and reduce procyclicality. Accomplishing these objectives depends on country-specific features of the banking system, business practices, and the calibration of the dynamic provisions scheme. In the case of Chile, a simulation analysis suggests Spanish dynamic provisions would improve banks'' resilience to adverse shocks but would not reduce procyclicality. To address the latter, other countercyclical measures should be considered.
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Date of creation: 01 May 2012
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-08 (All new papers)
- NEP-CBA-2012-07-08 (Central Banking)
- NEP-CMP-2012-07-08 (Computational Economics)
- NEP-RMG-2012-07-08 (Risk Management)
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