Loan Loss Provisioning Practices of Asian Banks

31 Pages Posted: 11 Apr 2012 Last revised: 14 May 2014

See all articles by Frank Packer

Frank Packer

Bank for International Settlements (BIS)

Haibin Zhu

Bank for International Settlements (BIS)

Date Written: April 1, 2012

Abstract

In the wake of the Asian financial crisis, many regimes in Asia adopted stricter provisioning requirements, as well as discretionary measures, with the objective of increasing provisioning in good times in response to rising levels of risk. Based on a final sample of 240 banks in 12 Asian economies, the evidence is that countercyclical loan loss provisioning has dominated throughout emerging Asia, most strikingly so in the case of India. Thus, loan loss provisioning did not simply become more conservative at all points in time subsequent to the Asian financial crisis, but actively leaned in a fashion that ameliorated swings in earnings and the macroeconomy.

Keywords: loan loss provisioning, financial system procyclicality, international accounting standards, earnings smoothing, macroprudential policy

JEL Classification: G21, G28

Suggested Citation

Packer, Frank and Zhu, Haibin, Loan Loss Provisioning Practices of Asian Banks (April 1, 2012). BIS Working Paper No. 375. Available at SSRN: https://ssrn.com/abstract=2038215 or http://dx.doi.org/10.2139/ssrn.2038215

Frank Packer (Contact Author)

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland
4161 280 8449 (Phone)

Haibin Zhu

Bank for International Settlements (BIS) ( email )

Hong Kong
Hong Kong
852 2878 7145 (Phone)
852 2878 7123 (Fax)

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