Loan loss provisioning and economic slowdowns : too much, too late?
Only recently has the debate on bank capital regulation devoted specific attention to the role that bank loan loss provisions can play as part of a minimum capital regulatory framework. Several national regulators have adopted or are planning to introduce a cyclically adjustable requirement for loan loss provisions, and the Basel Committee on Banking Supervision is considering how to provide adequate treatment to provisioning practices within a broad bank capital regulatory framework. The authors contribute to the ongoing debate by exploring the available evidence about bank provisioning practices around the world. They find that in the vast majority of cases banks tend to delay provisioning for bad loans until it is too late-when cyclical downturns have already set in-possibly magnifying the impact of the economic cycle on the income and capital of banks. Notwithstanding the considerable variation in the patterns followed by banks around the world, Laeven and Majnoni find that the size and timing of provisions tend to improve with the level of economic development.
|Date of creation:||31 Dec 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Concetta Chiuri, Maria & Ferri, Giovanni & Majnoni, Giovanni, 2002.
"The macroeconomic impact of bank capital requirements in emerging economies: Past evidence to assess the future,"
Journal of Banking & Finance,
Elsevier, vol. 26(5), pages 881-904, May.
- Chiuri, Maria Concetta & Ferri, Giovanni & Majnoni, Giovanni, 2001. "The macroeconomic impact of bank capital requirements in emerging economies - past evidence to assess the future," Policy Research Working Paper Series 2605, The World Bank.
- Maria Concetta Chiuri & Giovanni Ferri & Giovanni Majnoni, 2000. "The Macroeconomic Impact Of Bank Capital Requirements In Emerging Economies: Past Evidence To Assess The Future," SERIES 0002, Dipartimento di Scienze economiche e metodi matematici - Università di Bari, revised Sep 2000.
- Joe Peek & Eric Rosengren, 1993.
"The Capital Crunch: Neither A Borrower Nor A Lender Be,"
Boston College Working Papers in Economics
243, Boston College Department of Economics.
- Peek, Joe & Rosengren, Eric, 1995. "The Capital Crunch: Neither a Borrower nor a Lender Be," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 625-38, August.
- Joe Peek & Eric S. Rosengren, 1991. "The capital crunch: neither a borrower nor a lender be," Working Papers 91-4, Federal Reserve Bank of Boston.
- Mathias Dewatripont & Jean Tirole, 1994. "The prudential regulation of banks," ULB Institutional Repository 2013/9539, ULB -- Universite Libre de Bruxelles.
- Ahmed, Anwer S. & Takeda, Carolyn & Thomas, Shawn, 1999. "Bank loan loss provisions: a reexamination of capital management, earnings management and signaling effects," Journal of Accounting and Economics, Elsevier, vol. 28(1), pages 1-25, November.
- Allen N. Berger & Richard J. Herring & Giorgio P. Szegö, 1995.
"The Role of Capital in Financial Institutions,"
Center for Financial Institutions Working Papers
95-01, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Tirole, Jean & Fudenberg, Drew, 1995.
"A Theory of Income and Dividend Smoothing Based on Incumbency Rents,"
3160494, Harvard University Department of Economics.
- Fudenberg, Drew & Tirole, Jean, 1995. "A Theory of Income and Dividend Smoothing Based on Incumbency Rents," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 75-93, February.
- Fudenberg, Drew & Tirole, Jean, 1994. "A Theory of Income and Dividend Smoothing Based on Incumbency Rents," IDEI Working Papers 34, Institut d'Économie Industrielle (IDEI), Toulouse.
- repec:oup:qjecon:v:109:y:1994:i:2:p:399-441 is not listed on IDEAS
- Allen Berger & Gregory Udell, 1994.
"Did Risk-Based Capital Allocate Bank Credit and Cause a `Credit Crunch' in the U.S.?,"
Center for Financial Institutions Working Papers
94-07, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Allen N. Berger & Gregory F. Udell, 1993. "Did risk-based capital allocate bank credit and cause a credit crunch in the U.S.?," Finance and Economics Discussion Series 93-41, Board of Governors of the Federal Reserve System (U.S.).
- repec:oup:qjecon:v:112:y:1997:i:3:p:663-91 is not listed on IDEAS
- Kim, Daesik & Santomero, Anthony M., 1993. "Forecasting required loan loss reserves," Journal of Economics and Business, Elsevier, vol. 45(3-4), pages 315-329.
- Santiago Fernández de Lis & Jorge Martínez Pagés & Jesús Saurina, 2000. "Credit Growth, Problem Loans and Credit Risk Provisioning in Spain," Banco de Espa�a Working Papers 0018, Banco de Espa�a.
- Holmstrom, Bengt & Tirole, Jean, 2000. "Liquidity and Risk Management," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 295-319, August.
- Claudio Borio & Craig Furfine & Philip Lowe, 2001. "Procyclicality of the financial system and financial stability: issues and policy options," BIS Papers chapters, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 1-57 Bank for International Settlements.
- Ben S. Bernanke & Cara S. Lown, 1991. "The Credit Crunch," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 205-248.
- Anand Mohan Goel & Anjan V. Thakor, 2004.
"Why Do Firms Smooth Earnings?,"
- repec:oup:restud:v:58:y:1991:i:2:p:277-97 is not listed on IDEAS
- Timothy W. Koch & Larry D. Wall, 1999. "Banks' discretionary loan loss provisions: how important are constraints and asymmetries?," Proceedings 618, Federal Reserve Bank of Chicago.
- Larry D. Wall & Timothy W. Koch, 2000. "Bank loan-loss accounting: a review of theoretical and empirical evidence," Economic Review, Federal Reserve Bank of Atlanta, issue Q2, pages 1-20.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2749. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.