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Credit Cycles, Credit Risk, and Prudential Regulation Author info | Abstract | Publisher info | Download info | Related research | Statistics Jesus, Saurina
Gabriel, Jimenez
This paper finds strong empirical support of a positive, although quite lagged, relationship between rapid credit growth and loan losses. Moreover, it contains empirical evidence of more lenient credit standards during boom periods, both in terms of screening of borrowers and in collateral requirements. We find robust evidence that during upturns, riskier borrowers get bank loans, while collateralized loans decrease. We develop a regulatory prudential tool, based on a countercyclical, or forward-looking, loan loss provision that takes into account the credit risk profile of banks’ loan portfolios along the business cycle. Such a provision might contribute to reinforce the soundness and the stability of banking systems.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
718.
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Date of creation: 20 Mar 2006Date of revision:
Publication status: Published in International Journal of Central Banking Number 2.Volume 2(2006): pp. 65-98Handle: RePEc:pra:mprapa:718Contact details of provider: Postal: Schackstr. 4, D-80539 Munich, Germany Phone: +49-(0)89-2180-2219 Fax: +49-(0)89-2180-3900 Web page: http://mpra.ub.uni-muenchen.de More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Ekkehart Schlicht).
Keywords: credit risk ; lending cycles ; loan loss provisions ; bank capital ; collateral ; Other versions of this item:
Find related papers by JEL classification: G00 - Financial Economics - - General - - - General G0 - Financial Economics - - General
This paper has been announced in the following NEP Reports :
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