Dynamic Loan Loss Provisioning; Simulationson Effectiveness and Guide to Implementation
This simulation-based paper investigates the impact of different methods of dynamic provisioning on bank soundness and shows that this increasingly popular macroprudential tool can smooth provisioning costs over the credit cycle and lower banksâ€™ probability of default. In addition, the paper offers an in-depth guide to implementation that addresses pertinent issues related to data requirements, calibration and safeguards as well as accounting, disclosure and tax treatment. It also discusses the interaction of dynamic provisioning with other macroprudential instruments such as countercyclical capital.
|Date of creation:||01 May 2012|
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"Varieties of Crises and Their Dates
[This Time Is Different: Eight Centuries of Financial Folly]," Introductory Chapters, Princeton University Press.
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- Fabio Panetta & Paolo Angelini & Ugo Albertazzi & Francesco Columba & Wanda Cornacchia & Antonio Di Cesare & Andrea Pilati & Carmelo Salleo & Giovanni Santini, 2009. "Financial sector pro-cyclicality: lessons from the crisis," Questioni di Economia e Finanza (Occasional Papers) 44, Bank of Italy, Economic Research and International Relations Area.
- Marco Burroni & Mario Quagliariello & Emiliano Sabatini & Vincenzo Tola, 2009. "Dynamic provisioning: rationale, functioning, and prudential treatment," Questioni di Economia e Finanza (Occasional Papers) 57, Bank of Italy, Economic Research and International Relations Area.
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