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Loan Review, Provisioning, and Macroeconomic Linkages

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  • International Monetary Fund

Abstract

Loan review is a process routinely used by banks to assess the current value of loan portfolios. Provisioning is a technique to translate loan review results into the balance sheet. It allows for ongoing valuation of loans. Both are core elements of credit risk management and important to prudential oversight. As illustrated in this paper, valuation feeds into indicators of overall bank soundness and key macroprudential indicators. Country practices and recent moves to more forward-looking models are surveyed. Macroeconomic linkages are highlighted, including tax treatment of provisions, variables of the monetary survey, and procyclical aspects of loan valuation systems.

Suggested Citation

  • International Monetary Fund, 2000. "Loan Review, Provisioning, and Macroeconomic Linkages," IMF Working Papers 00/195, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:00/195
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    Citations

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    Cited by:

    1. Bouvatier, Vincent & Lepetit, Laetitia, 2008. "Banks' procyclical behavior: Does provisioning matter?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(5), pages 513-526, December.
    2. Vincent Bouvatier & Laetitia Lepetit, 2006. "Banks'procyclicality behavior : does provisioning matter ?," Cahiers de la Maison des Sciences Economiques bla06035, Université Panthéon-Sorbonne (Paris 1).
    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. Craigwell, Roland C & Elliott, Wayne A, 2011. "Loan loss provisioning in the commercial banking system of Barbados: practices and determinants," MPRA Paper 33426, University Library of Munich, Germany.
    5. Fofack, Hippolyte L., 2005. "Nonperforming loans in Sub-Saharan Africa : causal analysis and macroeconomic implications," Policy Research Working Paper Series 3769, The World Bank.
    6. Mario Quagliariello, "undated". "Banks' Performance over the Business Cycle: A Panel Analysis on Italian Intermediaries," Discussion Papers 04/17, Department of Economics, University of York.
    7. 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.
    8. Ali, Ashraf & M. Kabir, Hassan & Syed Abul, Basher, 2015. "Loan Loss Provisioning in OIC Countries: Evidence from Conventional vs. Islamic Banks," MPRA Paper 61687, University Library of Munich, Germany.
    9. In W Song, 2002. "Collateral in Loan Classification and Provisioning," IMF Working Papers 02/122, International Monetary Fund.
    10. Cavallo, Michele & Majnoni, Giovanni, 2001. "Do Banks provision for bad loans in good times? empirical evidence and policy implications," Policy Research Working Paper Series 2619, The World Bank.
    11. Torsten Wezel & Mario Mansilla & Gustavo Adler, 2009. "Modernizing Bank Regulation in Support of Financial Deepening; The Case of Uruguay," IMF Working Papers 09/199, International Monetary Fund.
    12. Alain Laurin & Giovanni Majnoni, 2003. "Bank Loan Classification and Provisioning Practices in Selected Developed and Emerging Countries," World Bank Publications, The World Bank, number 15157.
    13. Mark Illing & Ying Liu, 2003. "An Index of Financial Stress for Canada," Staff Working Papers 03-14, Bank of Canada.

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