The Determinants of Loan Loss Provisions: An Analysis of the Greek Banking System in Light of the Sovereign Debt Crisis

Platon Monokroussos, Dimitrios Thomakos and Thomas Alexopoulos

GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe from Hellenic Observatory, LSE

Abstract: We utilize a new set of macroeconomic and regulatory data to analyze the evolution of loan loss provisioning practices in the Greek banking system over the period 2005-2015. We explore the determinants of the aggregate loan loss reserves to total loans ratio, which reflects the accumulation of provisions net of write-offs, and constitutes an important metric of the credit quality of loan portfolios. Our results suggest that domestic credit institutions respond relatively quickly to macroeconomic shocks, though the latter’s effects on the provisioning behavior of the domestic banking system show significant persistence. Furthermore, the impact of macroeconomic shocks on the loan loss reserves ratio has become stronger (both in terms of magnitude and statistical significance) following the outbreak of the Greek sovereign debt crisis. From a macro policy perspective, this result indicates that a sustainable stabilization of macroeconomic conditions is a key precondition for safeguarding domestic financial stability. For a regulatory standpoint, it suggests that the possibility of macroeconomic regime-related effects on banks’ provisioning policies should be taken into account when macro prudential stress tests of the banking system are designed and implemented.

Date: 2016-11
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.lse.ac.uk/europeanInstitute/research/he ... SE/GreeSE-No.104.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.lse.ac.uk/europeanInstitute/research/hellenicObservatory/CMS%20pdf/Publications/GreeSE/GreeSE-No.104.pdf [301 Moved Permanently]--> https://www.lse.ac.uk/europeanInstitute/research/hellenicObservatory/CMS%20pdf/Publications/GreeSE/GreeSE-No.104.pdf)

Related works:
Chapter: The Determinants of Loan Loss Provisions: An Analysis of the Greek Banking System in Light of the Sovereign Debt Crisis (2017)
Working Paper: The determinants of loan loss provisions:an analysis of the Greek banking systemin light of the sovereign debt crisis (2016)
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:hel:greese:104

Access Statistics for this paper

More papers in GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe from Hellenic Observatory, LSE Contact information at EDIRC.
Bibliographic data for series maintained by Vassilis Monastiriotis ().