Fast to cut, slow to restore: Bank lending responses to IFRS 9 stage migrations

Bruno Buchetti, Salvatore Perdichizzi and Alessandro Santoni

Economics Letters, 2025, vol. 254, issue C

Abstract: We investigate how banks adjust lending and provisioning following credit risk stage migrations under IFRS 9, using loan-level data from the European credit register, AnaCredit. While provisions rise with downgrades and fall with upgrades, lending responses are sharply asymmetric: downgrades prompt immediate credit contraction, while upgrades lead to only cautious recovery. Stage 2 acts as an early-warning signal, and Stage 3 defaults leave a lasting stigma, constraining post-recovery credit. These findings suggest IFRS 9 enhances risk recognition but may amplify procyclical lending, with important policy implications for balancing financial stability and credit access across the cycle.

Keywords: IFRS 9; Stage migration; Credit risk management (search for similar items in EconPapers)
JEL-codes: E51 G21 G28 M41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:254:y:2025:i:c:s0165176525002836

DOI: 10.1016/j.econlet.2025.112446

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