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 in...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/12/1671257/loan-loss-provisioning-economic-slowdowns-too-much-too-late http://hdl.handle.net/10986/19410 |
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okr-10986-194102021-04-23T14:03:42Z Loan Loss Provisioning and Economic Slowdowns : Too Much, Too Late? Laeven, Luc Majnoni, Giovanni ACCOUNTING PRACTICES AGENTS ARBITRAGE BALANCE SHEET BALANCE SHEET INFORMATION BALANCE SHEETS BANK CAPITAL BANK EARNINGS BANK LENDING BANK LIABILITIES BANK LOANS BANK PROFITS BANK REGULATION BANK RISK BANK SUPERVISION BANKING SUPERVISION BANKING SYSTEMS BANKS BONDS CAPITAL REGULATION CAPITAL REQUIREMENT CAPITAL REQUIREMENTS CAPITAL STANDARDS COMMERCIAL BANKS CONSUMER PRICE INDEX CREDIT RISK CREDIT RISKS DISCLOSURE ECONOMETRIC EVIDENCE EXTERNALITIES FINANCIAL INSTITUTIONS FINANCIAL REGULATION FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL STABILITY FINANCIAL SYSTEMS GDP GDP PER CAPITA GOVERNMENT BONDS GROSS DOMESTIC PRODUCT GROWTH RATE INTEREST INCOME INTEREST RATE LIQUIDITY LOAN LOSS PROVISIONS LOSS RATIO MACROECONOMIC SHOCKS MINIMUM SOLVENCY RATIOS NEGATIVE EXTERNALITIES OPERATING COSTS PORTFOLIO PROBLEM LOANS PRUDENTIAL REQUIREMENTS REAL GDP REAL SECTOR REGULATORY FRAMEWORK REGULATORY REGIMES RESERVES RETAINED EARNINGS RISK MANAGEMENT RISK PREMIUM RISK TAKING RISK WEIGHTED ASSETS RISK-WEIGHTED ASSETS SMALL BANKS SOLVENCY SOLVENCY RATIO SOLVENCY RATIOS SUBSIDIARY TIER 1 CAPITAL TIER 2 CAPITAL 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. 2014-08-19T15:24:18Z 2014-08-19T15:24:18Z 2001-12 http://documents.worldbank.org/curated/en/2001/12/1671257/loan-loss-provisioning-economic-slowdowns-too-much-too-late http://hdl.handle.net/10986/19410 English en_US Policy Research Working Paper;No. 2749 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCOUNTING PRACTICES AGENTS ARBITRAGE BALANCE SHEET BALANCE SHEET INFORMATION BALANCE SHEETS BANK CAPITAL BANK EARNINGS BANK LENDING BANK LIABILITIES BANK LOANS BANK PROFITS BANK REGULATION BANK RISK BANK SUPERVISION BANKING SUPERVISION BANKING SYSTEMS BANKS BONDS CAPITAL REGULATION CAPITAL REQUIREMENT CAPITAL REQUIREMENTS CAPITAL STANDARDS COMMERCIAL BANKS CONSUMER PRICE INDEX CREDIT RISK CREDIT RISKS DISCLOSURE ECONOMETRIC EVIDENCE EXTERNALITIES FINANCIAL INSTITUTIONS FINANCIAL REGULATION FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL STABILITY FINANCIAL SYSTEMS GDP GDP PER CAPITA GOVERNMENT BONDS GROSS DOMESTIC PRODUCT GROWTH RATE INTEREST INCOME INTEREST RATE LIQUIDITY LOAN LOSS PROVISIONS LOSS RATIO MACROECONOMIC SHOCKS MINIMUM SOLVENCY RATIOS NEGATIVE EXTERNALITIES OPERATING COSTS PORTFOLIO PROBLEM LOANS PRUDENTIAL REQUIREMENTS REAL GDP REAL SECTOR REGULATORY FRAMEWORK REGULATORY REGIMES RESERVES RETAINED EARNINGS RISK MANAGEMENT RISK PREMIUM RISK TAKING RISK WEIGHTED ASSETS RISK-WEIGHTED ASSETS SMALL BANKS SOLVENCY SOLVENCY RATIO SOLVENCY RATIOS SUBSIDIARY TIER 1 CAPITAL TIER 2 CAPITAL |
| spellingShingle |
ACCOUNTING PRACTICES AGENTS ARBITRAGE BALANCE SHEET BALANCE SHEET INFORMATION BALANCE SHEETS BANK CAPITAL BANK EARNINGS BANK LENDING BANK LIABILITIES BANK LOANS BANK PROFITS BANK REGULATION BANK RISK BANK SUPERVISION BANKING SUPERVISION BANKING SYSTEMS BANKS BONDS CAPITAL REGULATION CAPITAL REQUIREMENT CAPITAL REQUIREMENTS CAPITAL STANDARDS COMMERCIAL BANKS CONSUMER PRICE INDEX CREDIT RISK CREDIT RISKS DISCLOSURE ECONOMETRIC EVIDENCE EXTERNALITIES FINANCIAL INSTITUTIONS FINANCIAL REGULATION FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL STABILITY FINANCIAL SYSTEMS GDP GDP PER CAPITA GOVERNMENT BONDS GROSS DOMESTIC PRODUCT GROWTH RATE INTEREST INCOME INTEREST RATE LIQUIDITY LOAN LOSS PROVISIONS LOSS RATIO MACROECONOMIC SHOCKS MINIMUM SOLVENCY RATIOS NEGATIVE EXTERNALITIES OPERATING COSTS PORTFOLIO PROBLEM LOANS PRUDENTIAL REQUIREMENTS REAL GDP REAL SECTOR REGULATORY FRAMEWORK REGULATORY REGIMES RESERVES RETAINED EARNINGS RISK MANAGEMENT RISK PREMIUM RISK TAKING RISK WEIGHTED ASSETS RISK-WEIGHTED ASSETS SMALL BANKS SOLVENCY SOLVENCY RATIO SOLVENCY RATIOS SUBSIDIARY TIER 1 CAPITAL TIER 2 CAPITAL Laeven, Luc Majnoni, Giovanni Loan Loss Provisioning and Economic Slowdowns : Too Much, Too Late? |
| relation |
Policy Research Working Paper;No. 2749 |
| description |
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. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Laeven, Luc Majnoni, Giovanni |
| author_facet |
Laeven, Luc Majnoni, Giovanni |
| author_sort |
Laeven, Luc |
| title |
Loan Loss Provisioning and Economic Slowdowns : Too Much, Too Late? |
| title_short |
Loan Loss Provisioning and Economic Slowdowns : Too Much, Too Late? |
| title_full |
Loan Loss Provisioning and Economic Slowdowns : Too Much, Too Late? |
| title_fullStr |
Loan Loss Provisioning and Economic Slowdowns : Too Much, Too Late? |
| title_full_unstemmed |
Loan Loss Provisioning and Economic Slowdowns : Too Much, Too Late? |
| title_sort |
loan loss provisioning and economic slowdowns : too much, too late? |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2001/12/1671257/loan-loss-provisioning-economic-slowdowns-too-much-too-late http://hdl.handle.net/10986/19410 |
| _version_ |
1764439702488743936 |