Is Bank Supervision Effective? Evidence from the Allowance for Loan and Lease Losses

Ling Yang

MPRA Paper from University Library of Munich, Germany

Abstract: I investigate whether bank supervision is effective in enforcing written rules on the estimations of the allowance for loan and lease losses (ALLL) consistently between public and private banks, which have different intensity of incentives to misreport the ALLL. Results suggest that bank supervision of the ALLL estimations was effective between 2002 and 2012, but has become lax recently. State-chartered public banks underestimated the ALLL by about 13% annually between 2013 and 2015. Bank regulators are willing to cater to banks’ private interests when the economic environment is good and the regulatory emphasis is weak, but not during the crisis.

Keywords: commercial banks; bank regulation; bank supervision; bank accounting and disclosure; allowance for loan and lease losses (ALLL); reporting incentives (search for similar items in EconPapers)
JEL-codes: G21 G28 M41 M48 (search for similar items in EconPapers)
Date: 2016-12-22
New Economics Papers: this item is included in nep-acc and nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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