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Effects of loan loss provisions on growth in bank lending : some international comparisons

Author

Listed:
  • Vincent Bouvatier
  • Laetitia Lepetit

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

Abstract

A dynamic provisioning system is one of the instruments that regulators could use for introducing counter-cyclicality into prudential regulation. The potential effectiveness of such instrument depends on how far actual backward-looking provisioning practices exacerbate growth in bank lending. We therefore investigate whether backward-looking provisioning practices amplify growth in bank lending and, if such an effect exists, whether there are differences in its magnitude across countries. Our results show that backwardlooking provisioning systems exacerbate banks' lending fluctuations in both developed and emerging countries, but with a stronger impact for emerging countries.

Suggested Citation

  • Vincent Bouvatier & Laetitia Lepetit, 2012. "Effects of loan loss provisions on growth in bank lending : some international comparisons," Post-Print hal-00785580, HAL.
    • Handle: RePEc:hal:journl:hal-00785580
    DOI: 10.2139/ssrn.1663580
    as

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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