Loan loss provisioning in the commercial banking system of Barbados: practices and determinants

Roland Craigwell and Wayne A Elliott

MPRA Paper from University Library of Munich, Germany

Abstract: The purpose of this paper is to investigate the process of loan loss provisioning within the commercial banking system of Barbados. It uses questionnaires and interviews to ascertain how banks set their provisional standards and levels. In addition, the results from this approach reveal, for the first time in Barbados, the individual banks‟ procedures for loan loss provisioning. An evaluation of the impact of macroeconomic and bank specific factors on commercial banks‟ provisions utilising panel dynamic ordinary least squares is also undertaken. Both sets of factors are found to influence the level of provisions. In particular, loan loss provisions are heavily dependent upon the performance of the real economy and competition in international markets is shown to have serious implications for the banking sector in both the short and long run. Moreover, this study asserts that larger banks in Barbados are better able to screen loans and avoid defaults.

Keywords: Loan Loss Provisioning; Banking System; Loan Classification (search for similar items in EconPapers)
JEL-codes: G21 G28 M41 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ban
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Published in International Research Journal of Finance and Economics 65 (2011): pp. 98-111

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:33426

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