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Fast to cut, slow to restore: Bank lending responses to IFRS 9 stage migrations

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  • Buchetti, Bruno
  • Perdichizzi, Salvatore
  • Santoni, Alessandro

Abstract

We investigate how banks adjust lending and provisioning following credit risk stage migrations under IFRS 9, using loan-level data from the European credit register, AnaCredit. While provisions rise with downgrades and fall with upgrades, lending responses are sharply asymmetric: downgrades prompt immediate credit contraction, while upgrades lead to only cautious recovery. Stage 2 acts as an early-warning signal, and Stage 3 defaults leave a lasting stigma, constraining post-recovery credit. These findings suggest IFRS 9 enhances risk recognition but may amplify procyclical lending, with important policy implications for balancing financial stability and credit access across the cycle.

Suggested Citation

  • Buchetti, Bruno & Perdichizzi, Salvatore & Santoni, Alessandro, 2025. "Fast to cut, slow to restore: Bank lending responses to IFRS 9 stage migrations," Economics Letters, Elsevier, vol. 254(C).
    • Handle: RePEc:eee:ecolet:v:254:y:2025:i:c:s0165176525002836
    DOI: 10.1016/j.econlet.2025.112446
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    References listed on IDEAS

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    Cited by:

    1. Kärnä, Anders & Östling Svensson, Karin, 2025. "Predicting Credit Deterioration: Internal Default Models versus Lending Rates," Working Paper Series 458, Sveriges Riksbank (Central Bank of Sweden).
    2. Yadira Salazar & Ana Zorio-Grima & Paloma Merello, 2025. "New disclosures on expected credit loss: effects on Banking credit risk and its links with portfolio specialization," Journal of Banking Regulation, Palgrave Macmillan, vol. 26(4), pages 878-890, December.

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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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