Loan Loss Provisioning by International Banks: Estimation, Determinants and Evidence
Posted: 14 May 2000
Abstract
In recent years loan loss provisions have become the major determinant of bank profitability levels and have had a significant impact upon capital adequacy measures. Given the implications of such matters for the overall stability of the financial system, it is important to understand the determinants of bank loan losses and bank loan loss provisioning policies. This article draws together the piecemeal and diverse literature concerning bank loan loss provisioning. The main conceptual issues considered are the fundamental nature of loan loss provisions, the alternative methods used to estimate loan losses and the determinants of loan losses and associated provisioning policies. The available empirical evidence is also reviewed.
JEL Classification: G21
Suggested Citation: Suggested Citation