Provisioning rules and bank lending: A theoretical model
Résumé
This paper develops a partial equilibrium model of a banking …rm to analyze how provisioning rules inuence loan market uctuations. We show that a backward-looking provisioning system ampli…es the pro-cyclicality of loan market uctuations. We demonstrate that, in a forward-looking provisioning system where statistical provisions are used to smooth the evolution of total loan loss provisions, the issue of pro-cyclicality of loan market uctuations does not exist. Our results support the recent call of the Basel Committee for the implementation of a forward-looking provisioning system to address procyclicality. JEL classi…cation: G21 anonymous referees for their helpful comments. The usual disclaimer applies.
Domaines
Economies et finances
Origine : Fichiers produits par l'(les) auteur(s)
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