Loan loss provisioning and economic slowdowns: too much too late?

Luc Laeven and Giovanni Majnoni

Conference Series ; [Proceedings], 2002

Abstract: Only recently the debate on bank capital regulation has devoted specific attention to the role that bank loan loss provisions can play as a part of the overall minimum capital regulatory framework. Several national regulators have adopted or are planning to introduce a cyclically adjustable requirement for loan loss provisions and the Basel Committee on Banking Supervision is considering how to address provisioning practices within a broad bank capital regulatory framework. This paper contributes to the ongoing debate by exploring the available evidence about bank loan loss provisioning around the world. We find that many banks tend to delay provisioning for bad loans until too late, when cyclical downturns have already set in, possibly magnifying the impact of the economic cycle on banks' income and capital. At the same time, we find a considerable difference in patterns followed by banks around the world.

Keywords: Loans; Risk management (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.bostonfed.org/bankinfo/conevent/slowdown/laeven_majnoni.pdf (application/pdf)

Related works:
Journal Article: Loan loss provisioning and economic slowdowns: too much, too late? (2003)
Working Paper: Loan loss provisioning and economic slowdowns: too much, too late? (2001)
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:fip:fedbcp:y:2002:x:6

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Conference Series ; [Proceedings] from Federal Reserve Bank of Boston Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Spozio ().