Effects of loan loss provisions on growth in bank lending: some international comparisons

Vincent Bouvatier and Laetitia Lepetit

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Abstract: A dynamic provisioning system is one of the instruments that regulators could use for introducing counter-cyclicality into prudential regulation. The potential e¤ective-ness of such instrument depends on how far actual provisioning practices exacerbate growth in bank lending. We therefore investigate the e¤ects of loan loss provisions on growth in bank lending, making a di¤erence between non discretionary and dis-cretionary loan loss provisions. International comparisons are made between …ve ge-ographical areas : Europe, Japan, the United-States, Central & South American and South & East Asia. Except for Japanese banks, we …nd a negative and signi…cant ef-fect of non discretionary loan loss provisions on growth in bank lending. This common feature lead us to conclude that banking regulators could reach a consensus concerning the bene…cial aspects of a dynamic provisioning system.

Keywords: bank lending; loan loss provisions; procyclicality (search for similar items in EconPapers)
Date: 2012-04
Note: View the original document on HAL open archive server: https://hal.science/hal-01098963
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Citations: View citations in EconPapers (29)

Published in International Economics, 2012, 132, pp.91-116

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Related works:
Journal Article: Effects of Loan Loss Provisions on Growth in Bank Lending: Some International Comparisons (2012)
Working Paper: Effects of loan loss provisions on growth in bank lending: some international comparisons (2012)
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