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Do Dynamic Provisions Enhance Bank Solvency and Reduce Credit Procyclicality? a Study of the Chilean Banking System

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  • Mr. Jorge A Chan-Lau

Abstract

Dynamic 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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  • Mr. Jorge A Chan-Lau, 2012. "Do Dynamic Provisions Enhance Bank Solvency and Reduce Credit Procyclicality? a Study of the Chilean Banking System," IMF Working Papers 2012/124, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2012/124
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    References listed on IDEAS

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    Cited by:

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    2. Agénor, Pierre-Richard & Pereira da Silva, Luiz, 2017. "Cyclically adjusted provisions and financial stability," Journal of Financial Stability, Elsevier, vol. 28(C), pages 143-162.
    3. Bank for International Settlements, 2012. "Operationalising the selection and application of macroprudential instruments," CGFS Papers, Bank for International Settlements, number 48, december.
    4. Agénor, Pierre-Richard & Pereira da Silva, Luiz, 2017. "Cyclically adjusted provisions and financial stability," Journal of Financial Stability, Elsevier, vol. 28(C), pages 143-162.
    5. International Monetary Fund, 2012. "Credit Growth and the Effectiveness of Reserve Requirements and Other Macroprudential Instruments in Latin America," IMF Working Papers 2012/142, International Monetary Fund.
    6. 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.
    7. Tovar, Camilo & Garcia-Escribano, Mercedes & Vera, Mercedes, 2012. "El crecimiento del crédito y la efectividad de los requerimientos de encaje y otros instrumentos macroprudenciales en América Latina," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 24, pages 45-64.
    8. Schwarz Claudia & Karakitsos Polychronis & Merriman Niall & Studener Werner, 2015. "Why Accounting Matters: A Central Bank Perspective," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 5(1), pages 1-42, March.
    9. Torsten Wezel & Mr. Jorge A Chan-Lau & Mr. Francesco Columba, 2012. "Dynamic Loan Loss Provisioning: Simulationson Effectiveness and Guide to Implementation," IMF Working Papers 2012/110, International Monetary Fund.
    10. Pozo, Jorge, 2023. "The effects of countercyclical leverage buffers on macroeconomic and financial stability," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 194-217.
    11. Miguel Resende & Carla Carvalho & Cecília Carmo, 2024. "Impacts of the Expected Credit Loss Model on Pro-Cyclicality, Earnings Management, and Equity Management in the Portuguese Banking Sector," JRFM, MDPI, vol. 17(3), pages 1-19, March.
    12. Elias Minaya & Miguel Cabello, 2017. "Macroprudential Policies in Peru: The effects of Dynamic Provisioning and Conditional Reserve Requirements," BIS Working Papers 675, Bank for International Settlements.
    13. Cabello, Miguel & Lupú, José & Minaya, Elías, 2017. "Macroprudential Policies in Peru: The effects of Dynamics Provisioning and Conditional Reserve Requirements," Working Papers 2017-002, Banco Central de Reserva del Perú.

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