Timing of banks' loan loss provisioning during the crisis / by Leo de Haan and Maarten R.C. van Oordt.: FB3-5/2016-27E-PDF
We estimate a panel error correction model for loan loss provisions, using unique supervisory data on flow of funds into and out of the allowance for loan losses of 25 Dutch banks in the post-2008 crisis period. We find that these banks aim for an allowance of 49% of impaired loans. In the short run, however, the adjustment of the allowance is only 29% of the change in impaired loans. The deviation from the target is made up by (a) larger additions to allowances in subsequent quarters and (b) smaller reversals of allowances when loan losses do not materialize. After one quarter, the adjustment toward the target level is 34% and after four quarters is 81%. For individual banks, there are substantial differences in timing of provisioning for bad loan losses. We present two model-based metrics that inform supervisors on the extent to which banks’ short-term provisioning behaviour is out of sync with their target levels.
Permanent link to this Catalogue record:
publications.gc.ca/pub?id=9.819215&sl=0
| Department/Agency | Bank of Canada. |
|---|---|
| Title | Timing of banks' loan loss provisioning during the crisis / by Leo de Haan and Maarten R.C. van Oordt. |
| Series title | Staff Working Paper, 1701-9397 ; 2016-27 |
| Publication type | Series - View Master Record |
| Language | [English] |
| Format | Electronic |
| Electronic document | |
| Note(s) | "June 2016." Includes bibliographical references (p. 18-20). |
| Publishing information | [Ottawa] : Bank of Canada, 2016. |
| Author / Contributor | De Haan, Leo. Van Oordt, Maarten R. C. |
| Description | iii, 31 p. |
| Catalogue number |
|
| Subject terms | Banks Financial crisis |
Request alternate formats
To request an alternate format of a publication, complete the Government of Canada Publications email form. Use the form’s “question or comment” field to specify the requested publication.- Date modified: