 Loan Loss Provisioning in Selected European Banking Sectors: Do Banks Really Behave in a Procyclical Way?Jan Frait () and Zlatuse Komarkova () Czech Journal of Economics and Finance (Finance a uver), 2013, vol. 63, issue 4, 308-326 Abstract: This paper sets out to discuss the extent of procyclicality in European banks’ lending behavior and how much the regulatory and accounting framework may contribute to it. The main focus is the behavior of banks regarding provisioning against impaired financial assets. It also discusses whether a through-the-cycle provisioning regime could serve as one of the possible regulatory responses to the ongoing financial crisis. Our applied analysis reveals that European banks are among those that provision in a procyclical manner. On the theoretical level, therefore, through-the-cycle provisioning could be helpful in creating a buffer during good times which could then be used during recessions. On the practical level, however, through-the-cycle provisioning would for numerous reasons be difficult to introduce soon and would first need to be aligned with the other components of the international framework for accounting and for the regulation of financial institutions. Keywords: procyclicality; credit risk through-the-cycle provisioning; dynamic provisioning; macroprudential policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:63:y:2013:i:4:p:308-326 Access Statistics for this article More articles in Czech Journal of Economics and Finance (Finance a uver) from Charles University Prague, Faculty of Social Sciences Contact information at EDIRC. |
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