EconPapers    
Economics at your fingertips  
 

Forward Looking Loan Provisions: Credit Supply and Risk-taking

Bernardo Morais, Gaizka Ormazabal, Jose-Luis Peydro (), Mónica Roa and Miguel Sarmiento ()

No 1199, Working Papers from Barcelona Graduate School of Economics

Abstract: e show corporate-level real, financial, and (bank) risk-taking effects associated with calculating loan provisions based on expected-rather than incurred-credit losses. For identification, we exploit unique features of a Colombian reform and supervisory, matched loan-level data. The regulatory change induces a dramatic increase in provisions. Banks tighten all new lending conditions, adversely affecting borrowing-firms, with stronger effects for risky-firms. Moreover, to minimize provisioning, more affected (less-capitalized) banks cut credit supply to risky-firms- SMEs with shorter credit history, less tangible assets or more defaulted loans-but engage in "search-for-yield" within regulatory constraints and increase portfolio concentration, thereby decreasing risk diversification.

Keywords: loan provisions; IFRS9; ECL; corporate real and credit supply effects of accounting; bank risk-taking (search for similar items in EconPapers)
JEL-codes: E31 G18 G21 G28 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-acc and nep-mac
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.barcelonagse.eu/sites/default/files/working_paper_pdfs/1199.pdf (application/pdf)

Related works:
Working Paper: Forward looking loan provisions: Credit supply and risk-taking (2020) Downloads
Working Paper: Forward Looking Loan Provisions: Credit Supply and Risk-Taking (2020) Downloads
Working Paper: Forward Looking Loan Provisions: Credit Supply and Risk-Taking (2020) Downloads
Working Paper: Forward Looking Loan Provisions: Credit Supply and Risk-Taking (2020) Downloads
Working Paper: Forward looking loan provisions: Credit supply and risk-taking (2020) Downloads
Working Paper: Forward looking loan provisions: Credit supply and risk-taking (2020) Downloads
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:bge:wpaper:1199

Access Statistics for this paper

More papers in Working Papers from Barcelona Graduate School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Bruno Guallar ().

 
Page updated 2021-02-25
Handle: RePEc:bge:wpaper:1199