Credit Losses in Australasian Banking

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Credit Losses in Australasian Banking

Author Info

Kurt Hess () (University of Waikato)
Arthur Grimes (Motu Economic & Public Policy Research)
Mark J. Holmes (University of Waikato)

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Abstract

We analyse determinants of bank credit losses in Australasia. Despite sizeable credit losses over the past two decades, ours is the first systematic study to do so. Analysis is based on a comprehensive dataset retrieved from original financial reports of 32 Australasian banks (1980-2005). Credit losses rise when the macro economy is weak. Asset markets, particularly the equity market, are also important. Larger banks provide more for credit losses while less efficient banks have greater asset quality problems. Strong loan growth translates into significantly higher credit losses with a lag of 2-4 years. Finally, the results show strong evidence of income smoothing activities by banks.

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Publisher Info
Paper provided by University of Waikato, Department of Economics in its series Working Papers in Economics with number 08/10.

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Length: 23 pages
Date of creation: 18 Jun 2008
Date of revision:
Handle: RePEc:wai:econwp:08/10

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Article
- Kurt Hess & Arthur Grimes & Mark Holmes, 2009. "Credit Losses in Australasian Banking," The Economic Record, The Economic Society of Australia, vol. 85(3), pages 331-343, 09. [Downloadable!] (restricted)

Find related papers by JEL classification:
G20 - Financial Economics - - Financial Institutions and Services - - - General
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-06-27 (All new papers)
NEP-BAN-2008-06-27 (Banking)

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