A global snapshot on the cyclicality of provisions: unveiling IFRS 9’s impact

Oren Mooneeapen () and Phillip de Jager ()
Additional contact information
Oren Mooneeapen: University of Cape Town
Phillip de Jager: University of Cape Town

Journal of Banking Regulation, 2025, vol. 26, issue 3, No 12, 518-530

Abstract: Abstract The purpose of this paper is to examine the impact of IFRS 9 on the cyclicality of bank loan loss provisions (LLPs) for a global sample of banks from both advanced economies (AEs) and emerging market and developing economies (EMDEs). Fixed effects panel regression is used for the sample of 1096 banks for the period 1998–2022. The main variable of interest is the business cycle indicator, gross domestic product growth, with LLP being the dependent variable. Controls are included for both discretionary and non-discretionary provisioning behaviour. IFRS 9 is found to mitigate the procyclicality of LLPs at the global level, in AEs and Europe, and to worsen the procyclicality of LLPs in EMDEs and Asia. The findings highlight that the level of LLP procyclicality in the absence of IFRS 9 determines whether, and to what extent, IFRS 9 mitigates or worsens LLP procyclicality, a pattern also observed at the sub-regional level. While it is known that LLPs can influence procyclicality, the current study addresses the tensions in the literature on LLP cyclicality under IFRS 9 specifically by investigating variations globally, across AEs and EMDEs, and diverse regions. The results emphasise that a one-size-fits-all approach to mitigating LLP procyclicality might not work as the impact of IFRS 9 on LLP procyclicality exhibits significant variations across diverse regions and country classification, and is also influenced by the level of LLP procyclicality that prevails in the absence of the standard.

Keywords: Procyclicality; Loan loss provisions; Banking; IFRS 9; Expected credit loss (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1057/s41261-025-00274-1 Abstract (text/html)
Access to full text is restricted to subscribers.

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:pal:jbkreg:v:26:y:2025:i:3:d:10.1057_s41261-025-00274-1

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41261/PS2

DOI: 10.1057/s41261-025-00274-1

Access Statistics for this article

Journal of Banking Regulation is currently edited by Dalvinder Singh

More articles in Journal of Banking Regulation from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().