Provisioning Requirements in Latin America: Where Does the Region Stand?

Abstract

This policy note focuses on provisioning practices in Latin America, a supervisory tool that if well designed can contribute to strengthen both micro and macro prudential regulation. We explain the importance of an adequate regulatory regime for provisioning requirements. Based on recent development in the literature and recommendations from international regulatory-setting bodies, we identify key features of an adequate provisioning regime and describe the most salient characteristics of provisioning regimes in Latin America to construct an index to assess the quality of the provisioning regimes in the selected countries.

Keywords: Loan loss provisions, financial regulation, Latin America

JEL Classification: G2, G3