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Loan loss provisions and macroeconomic shocks: Some empirical evidence for italian banks during the crisis

Guglielmo Maria Caporale, Matteo Alessi (), Stefano Di Colli and Juan Sergio Lopez

Finance Research Letters, 2018, vol. 25, issue C, 239-243

Abstract: This paper uses data from a panel of more than 400 Italian banks for the period 2001–2015 to examine the main determinants of loan loss provision (LLP), which are classified as either discretionary (income smoothing, capital management, signalling) or non-discretionary (related to the business cycle). The possible effects of the double-dip recession of 2008–9 and 2011–15 are also examined. The results suggest that LLP in Italian banks is countercyclical, with non-discretionary components and macroeconomic shocks playing a significant role. Moreover, LLP is less cyclical in the case of local banks, since their loans are more collateralised and their behaviour is more strongly affected by supervisory activity.

Keywords: Loan loss provision; Bank lending; Financial system cyclicality (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:25:y:2018:i:c:p:239-243

DOI: 10.1016/j.frl.2017.10.031

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