The Provisioning Experience of the Major UK Banks: A Small Panel Investigation

Bank of England Working Paper No. 177

41 Pages Posted: 31 Dec 2003

See all articles by Darren Pain

Darren Pain

Bank of England - Foreign Exchange Division

Abstract

Using panel regression analysis, the paper investigates what factors may help to explain increases in loan-loss provisions for the major UK banks. Explanatory variables reviewed include aggregate variables such as GDP growth as well as bank-specific factors such as the composition of the loan portfolio. The main findings are that a number of macroeconomic variables can indeed inform about banks' provisions, in particular real GDP growth, real interest rates and lagged aggregate lending growth. Bank-specific behaviour is also important - increased lending to riskier sectors, such as commercial property companies, has generally been associated with higher provisions.

Suggested Citation

Pain, Darren, The Provisioning Experience of the Major UK Banks: A Small Panel Investigation. Bank of England Working Paper No. 177, Available at SSRN: https://ssrn.com/abstract=425760 or http://dx.doi.org/10.2139/ssrn.425760

Darren Pain (Contact Author)

Bank of England - Foreign Exchange Division ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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