Determinants of the Loan Loss Allowance: Some Cross-Country Comparisons

37 Pages Posted: 19 Feb 2004

See all articles by Larry D. Wall

Larry D. Wall

Federal Reserve Bank of Atlanta - Research Department

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

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Abstract

This paper analyses the determinants of banks' loan loss allowances for samples of US banks and three non-US samples: a group of 21 countries, Canada and Japan. The model includes fundamental (or non-discretionary) determinants of the allowance such as non-performing loans, and discretionary determinants such as income before the loan loss provision. The results suggest that the loan loss allowance is sensitive to pre-provision income in almost all samples. However, the results also suggest that some variables thought to reflect fundamental factors in US analysis, such as net chargeoffs, are not significant factors for non-US banks.

Keywords: loan loss allowance, accounting standards, international banking,

JEL Classification: G21, G28, E58, F23, G33

Suggested Citation

Wall, Larry D. and Hasan, Iftekhar, Determinants of the Loan Loss Allowance: Some Cross-Country Comparisons. Available at SSRN: https://ssrn.com/abstract=501783 or http://dx.doi.org/10.2139/ssrn.501783

Larry D. Wall

Federal Reserve Bank of Atlanta - Research Department ( email )

1000 Peachtree Street, NE
Atlanta, GA 30309-4470
United States
404-498-8937 (Phone)
404-498-8956 (Fax)

HOME PAGE: http://www.frbatlanta.org/econ_rd/bios/wall.htm

Iftekhar Hasan (Contact Author)

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

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