IFRS 9, banking risk and COVID-19: Evidence from Europe

Yadira Salazar, Paloma Merello and Ana Zorio-Grima

Finance Research Letters, 2023, vol. 56, issue C

Abstract: We explore whether the shift to the Expected Credit Loss model (ECL) helps Loan Loss Provisions (LLPs) anticipate future overall banking risk as compared to the Incurred Credit Loss model (ICL). Using a sample of European banks from 2015–2021, we find that ECL is more effective than ICL. We are pioneer to find evidence that stage 2 Loan Loss Allowance (LLA) is a good driver of future overall banking risk and that provisions moratoria due to the COVID-19 pandemic diminished the identified significant effect of LLPs and stage 2 LLA on banking risk, as expected.

Keywords: Banking risk; Expected credit loss; Loan loss provision; Stages; Economic cycle (search for similar items in EconPapers)
JEL-codes: G21 G23 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612323005020
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323005020

DOI: 10.1016/j.frl.2023.104130

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().