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

Authors
Publisher
Elsevier B.V.
Volume
132
Identifiers
DOI: 10.1016/s2110-7017(13)60059-1
Keywords
  • G21
  • Bank Lending
  • Loan Loss Provisions
  • Procyclicality
  • Crédit
  • Provisions Pour Pertes
  • Pro-Cyclicité

Abstract

Abstract A dynamic provisioning system is one of the instruments that regulators could use for introducing counter-cyclicality into prudential regulation. The potential effectiveness of such instrument depends on how far actual backward-looking provisioning practices exacerbate growth in bank lending. We therefore investigate whether backward-looking provisioning practices amplify growth in bank lending and, if such an effect exists, whether there are differences in its magnitude across countries. Our results show that backward-looking provisioning systems exacerbate banks' lending fluctuations in both developed and emerging countries, but with a stronger impact for emerging countries.

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