Loan Review, Provisioning, and Macroeconomic Linkages

32 Pages Posted: 6 Feb 2006

See all articles by Luis Cortavarria-Checkley

Luis Cortavarria-Checkley

International Monetary Fund (IMF); Superintendency of Banks, Insurance Companies and Pension Funds of Peru; International Monetary Fund

Claudia Dziobek

International Monetary Fund (IMF)

Akihiro Kanaya

International Monetary Fund (IMF) - Monetary and Exchange Affairs Department

Inwon Song

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2000

Abstract

Loan review is a process routinely used by banks to assess the current value of loan portfolios. Provisioning is a technique to translate loan review results into the balance sheet. It allows for ongoing valuation of loans. Both are core elements of credit risk management and important to prudential oversight. As illustrated in this paper, valuation feeds into indicators of overall bank soundness and key macroprudential indicators. Country practices and recent moves to more forward-looking models are surveyed, Macroeconomic linkages are highlighted, including tax treatment of provisions, variables of the monetary survey, and procyclical aspects of loan valuation systems.

Keywords: Nonperforming loans, cyclical bank behavior, capital ratios

JEL Classification: E5, G2, H25, K2, 016

Suggested Citation

Cortavarria, Luis A and Dziobek, Claudia Helene and Kanaya, Akihiro and Song, Inwon, Loan Review, Provisioning, and Macroeconomic Linkages (December 2000). IMF Working Paper No. 00/195, Available at SSRN: https://ssrn.com/abstract=880313

Luis A Cortavarria (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Superintendency of Banks, Insurance Companies and Pension Funds of Peru ( email )

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Claudia Helene Dziobek

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Akihiro Kanaya

International Monetary Fund (IMF) - Monetary and Exchange Affairs Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Inwon Song

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States