Operational loss recoveries and the macroeconomic environment: Evidence from the U.S. banking sector

W. Scott Frame, Nika Lazaryan, Ping McLemore and Atanas Mihov

Journal of Banking & Finance, 2024, vol. 165, issue C

Abstract: Using supervisory data from large U.S. bank holding companies (BHCs), we document that operational loss recovery rates decrease in macroeconomic downturns. This procyclical relationship varies by business lines and loss event types and is robust to alternative data aggregations, macroeconomic measurement horizons, subperiod partitions and estimation methodologies. Further analysis shows that resource constraints faced by BHC risk management functions is a plausible explanation for these patterns. Our findings offer new evidence on how economic shocks transmit to banking industry losses with implications for risk management and supervision.

Keywords: Operational losses; Loss recoveries; Macroeconomic environment; Banking sector (search for similar items in EconPapers)
JEL-codes: G21 G28 G29 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426624001377
Full text for ScienceDirect subscribers only

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:eee:jbfina:v:165:y:2024:i:c:s0378426624001377

DOI: 10.1016/j.jbankfin.2024.107220

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().