Banks' procyclical behavior: Does provisioning matter?

Vincent Bouvatier and Laetitia Lepetit

Journal of International Financial Markets, Institutions and Money, 2008, vol. 18, issue 5, 513-526

Abstract: A panel of 186 European banks is used for the period 1992-2004 to determine if banking behaviors, induced by the capital adequacy constraint and the provisioning system, amplify credit fluctuations. We find that poorly capitalized banks are constrained to expand credit. We also find that loan loss provisions (LLP) made in order to cover expected future loan losses (non-discretionary LLP) amplify credit fluctuations. By contrast, LLP used for management objectives (discretionary LLP) do not affect credit fluctuations. The findings of our research are consistent with the call for the implementation of a dynamic provisioning system in Europe.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (85)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042-4431(07)00038-8
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Banks' procyclical behavior: Does provisioning matter? (2008)
Working Paper: Banks' Procyclical Behavior: Does Provisioning Matter? (2008)
Working Paper: Banks’ procyclical behavior: Does provisioning matter? (2008)
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:eee:intfin:v:18:y:2008:i:5:p:513-526

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().