Do Dynamic Provisions Enhance Bank Solvency and Reduce Credit Procyclicality? A Study of the Chilean Banking System
Journal of Banking Regulation, Vol. 13, No. 3, pp.178-188, July 2012
Posted: 10 Jul 2012
There are 3 versions of this paper
Do Dynamic Provisions Enhance Bank Solvency and Reduce Credit Procyclicality? A Study of the Chilean Banking System
Do Dynamic Provisions Enhance Bank Solvency and Reduce Credit Procyclicality? A Study of the Chilean Banking System
Date Written: April 1, 2012
Abstract
Dynamic provisions could help to enhance the solvency of individual banks and reduce procyclicality. Accomplishing these objectives depends on country-specific features of the banking system, business practices and the calibration of the dynamic provisions scheme. In the case of Chile, a simulation analysis suggests Spanish dynamic provisions would improve banks’ resilience to adverse shocks but would not reduce procyclicality. To address the latter, other countercyclical measures should be considered.
Keywords: Dynamic provisions, procyclicality, banks, simulation, Chile
JEL Classification: G21, G28, C5
Suggested Citation: Suggested Citation