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Loan loss provisioning practices of Asian banks

  • Frank Packer
  • Haibin Zhu

In the wake of the Asian financial crisis, many regimes in Asia adopted stricter provisioning requirements, as well as discretionary measures, with the objective of increasing provisioning in good times in response to rising levels of risk. Based on a final sample of 240 banks in 12 Asian economies, the evidence is that countercyclical loan loss provisioning has dominated throughout emerging Asia, most strikingly so in the case of India. Thus, loan loss provisioning did not simply become more conservative at all points in time subsequent to the Asian financial crisis, but actively leaned in a fashion that ameliorated swings in earnings and the macroeconomy.

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Paper provided by Bank for International Settlements in its series BIS Working Papers with number 375.

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Length: 31 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:bis:biswps:375
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  1. Vincent Bouvatier & Laetitia Lepetit, 2006. "Banks' procyclicality behavior : does provisioning matter ?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00115622, HAL.
  2. Jacob A. Bikker & Paul A.J. Metzemakers, 2003. "Bank Provisioning Behaviour and Procyclicality," DNB Staff Reports (discontinued) 111, Netherlands Central Bank.
  3. Madhusudan Mohanty & Philip Turner, 2010. "Banks and financial intermediation in emerging Asia: reforms and new risks," BIS Working Papers 313, Bank for International Settlements.
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