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Dynamic provisioning: Some lessons from existing experiences

Author

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  • Santiago Fernández de Lis
  • Alicia Garcia-Herrero

Abstract

After analyzing the different reasons why the financial system and also the regulatory framework induced procyclicality, this paper reviews the experiences of three countries which have introduced dynamic provisioning as a regulatory tool to limit procyclicality. The case of Spain the country with the longest experience is reviewed as well as those of Colombia having recently adopted dynamic provisioning. A number of policy lessons are drawn from that comparison.

Suggested Citation

  • Santiago Fernández de Lis & Alicia Garcia-Herrero, 2010. "Dynamic provisioning: Some lessons from existing experiences," Working Papers 1014, BBVA Bank, Economic Research Department.
  • Handle: RePEc:bbv:wpaper:1014
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    References listed on IDEAS

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    1. Lepetit, Laetitia & Nys, Emmanuelle & Rous, Philippe & Tarazi, Amine, 2008. "The expansion of services in European banking: Implications for loan pricing and interest margins," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2325-2335, November.
    2. Gabriel Jiménez & Jesús Saurina, 2006. "Credit Cycles, Credit Risk, and Prudential Regulation," International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
    3. Alicia Garcia-Herrero & Santiago Fernandez de Lis, 2008. "The Housing Boom and Bust in Spain: Impact of the Securitisation Model and Dynamic Provisioning," Working Papers 0806, BBVA Bank, Economic Research Department.
    4. Jesús Saurina & Carlos Trucharte, 2007. "An Assessment of Basel II Procyclicality in Mortgage Portfolios," Journal of Financial Services Research, Springer;Western Finance Association, vol. 32(1), pages 81-101, October.
    5. Devenow, Andrea & Welch, Ivo, 1996. "Rational herding in financial economics," European Economic Review, Elsevier, vol. 40(3-5), pages 603-615, April.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Morgan, Peter J. & Lamberte , Mario, 2012. "Strengthening Financial Infrastructure," ADBI Working Papers 345, Asian Development Bank Institute.
    2. Ren, Haocong, 2011. "Countercyclical financial regulation," Policy Research Working Paper Series 5823, The World Bank.
    3. Małgorzata Karaś, 2013. "FFR Level in the Period 2000-2007 and the Emergence of the Asset Price Bubble on the US Real Estate Market," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 33.
    4. Gebhardt, Günther & Novotny-Farkas, Zoltán, 2018. "Comparability and predictive ability of loan loss allowances: The role of accounting regulation versus bank supervision," CFS Working Paper Series 591, Center for Financial Studies (CFS).
    5. International Monetary Fund, 2011. "Chile: Selected Issues," IMF Staff Country Reports 11/262, International Monetary Fund.
    6. Alejandro Izquierdo & Rudy Loo-Kung & Liliana Rojas-Suarez, 2013. "Macroprudential Regulations in Central America," Working Papers 318, Center for Global Development.
    7. Malgorzata Olszak, 2012. "Macroprudential policy - aim, instruments and institutional architecture (Polityka ostroznosciowa w ujêciu makro - cel, instrumenty i architektura instytucjonalna)," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 10(39), pages 7-32.

    More about this item

    Keywords

    Financial Stability; banking regulation; dynamic provisioning; Spain; Peru;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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