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The provisioning experience of the major UK banks: a small panel investigation

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  • Darren Pain

Abstract

Using panel regression analysis, the factors that may help to explain increases in loan-loss provisions for the major UK banks are investigated. Explanatory variables reviewed include aggregate variables such as GDP growth as well as bank-specific factors such as the composition of the loan portfolio. The main findings are that a number of macroeconomic variables can indeed inform about banks' provisions, in particular real GDP growth, real interest rates and lagged aggregate lending growth. Bank-specific behaviour is also important - increased lending to riskier sectors, such as commercial property companies, has generally been associated with higher provisions.

Suggested Citation

  • Darren Pain, 2003. "The provisioning experience of the major UK banks: a small panel investigation," Bank of England working papers 177, Bank of England.
  • Handle: RePEc:boe:boeewp:177
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    Cited by:

    1. Emrah Arbak, 2017. "Identifying the provisioning policies of Belgian banks," Working Paper Research 326, National Bank of Belgium.
    2. Athanasoglou, Panayiotis P. & Daniilidis, Ioannis & Delis, Manthos D., 2014. "Bank procyclicality and output: Issues and policies," Journal of Economics and Business, Elsevier, vol. 72(C), pages 58-83.
    3. Wahyoe Soedarmono & Amine Tarazi & Agusman Agusman & Gary S. Monroe & Dominic Gasbarro, 2016. "Loan Loss Provisions and Lending Behavior of Banks: Do Information Sharing and Borrower Legal Rights Matter?," Working Papers hal-01316717, HAL.
    4. Vincent Bouvatier & Lætitia Lepetit, 2011. "Canal des provisions bancaires et cyclicité du marché du crédit," Revue économique, Presses de Sciences-Po, vol. 62(1), pages 67-85.
    5. Bouvatier, Vincent & Lepetit, Laetitia, 2012. "Provisioning rules and bank lending: A theoretical model," Journal of Financial Stability, Elsevier, vol. 8(1), pages 25-31.
    6. Sophocles Vogiazas & Constantinos Alexiou, 2013. "Liquidity And The Business Cycle: Empirical Evidence From The Greek Banking Sector," Economic Annals, Faculty of Economics, University of Belgrade, vol. 58(199), pages 109-126, October -.
    7. Nikola Radivojevic & Jelena Jovovic, . "Examining of Determinants of Non-Performing Loans," Prague Economic Papers, University of Economics, Prague, vol. 0, pages 1-17.
    8. Emrah Arbak, 2017. "Identifying the provisioning policies of Belgian banks," Working Paper Research 326, National Bank of Belgium.
    9. Stéphane Albert & Hervé Alexandre, 2013. "Banks’ Earnings: an empirical evidence of the influence of economic and financial markets factors," Post-Print hal-01622842, HAL.
    10. repec:lan:wpaper:68464009 is not listed on IDEAS
    11. Coffinet, J. & Lin, S. & Martin, C., 2009. "Stress testing French banks' income subcomponents," Working papers 242, Banque de France.
    12. Wahyoe Soedarmono & Sigid Eko Pramono & Amine Tarazi, 2016. "The procyclicality of loan loss provisions in Islamic banks: Do managerial discretions matter?," Working Papers hal-01281151, HAL.
    13. Marcucci, Juri & Quagliariello, Mario, 2008. "Is bank portfolio riskiness procyclical: Evidence from Italy using a vector autoregression," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(1), pages 46-63, February.
    14. Matteo Alessi & Stefano Di Colli & Juan Sergio Lopez, 2014. "Loan Loss Provisioning and Relationship Banking in Italy: Practices and Empirical Evidence," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 3(1), pages 111-129, June.
    15. Ali, Asghar & Daly, Kevin, 2010. "Macroeconomic determinants of credit risk: Recent evidence from a cross country study," International Review of Financial Analysis, Elsevier, vol. 19(3), pages 165-171, June.
    16. Petr Jakubík, 2011. "Household Balance Sheets and Economic Crisis," Working Papers IES 2011/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2011.
    17. Ozili, Peterson K, 2017. "Bank Loan Loss Provisions, Investor Protection and the Macroeconomy," MPRA Paper 80147, University Library of Munich, Germany.
    18. Natalia Podlich & Didar Illyasov & Elena Tsoy & Shynar Shaikh, 2010. "The Methodology of Stress Tests for the Kazakh Banking System," ifo Working Paper Series 85, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    19. Noor-e-Saher & Mehran Herbert, 2010. "Response of Long-term Interest Rate to Fiscal Imbalance: Evidence from Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 6, pages 43-49.

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