Credit Losses in Australasian Banking

Kurt Hess, Arthur Grimes and Mark J. Holmes ()

The Economic Record, 2009, vol. 85, issue 270, pages 331-343

Abstract: We analyse the determinants of bank credit losses in Australasia. Despite sizeable credit losses over the past two decades, ours is the first systematic study to do so. Analysis is based on a comprehensive dataset retrieved from original financial reports of 32 Australasian banks (1980-2005). Credit losses rise when the macro economy is weak. Asset markets, particularly the equity market, are also important. Larger banks provide more for credit losses while banks with high cost-income-ratios show greater loan loss provisions. Strong loan growth translates into significantly higher credit losses with a lag of 2-4 years. Finally, the results show strong evidence of income smoothing activities by banks. Copyright © 2009 The Economic Society of Australia.

Date: 2009

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Working Paper: Credit Losses in Australasian Banking (2008)
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