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Title: Loan loss provisions and macroeconomic shocks: some empirical evidence for Italian banks during the crisis
Authors: Caporale, GM
Alessi, M
Di Colli, S
Lopez, JS
Keywords: Loan Loss Provision;Bank Lending;Financial System Cyclicality
Citation: Finance Research Letters, 2017
Abstract: This paper uses data from a panel of more than 400 Italian banks for the period 2001 – 2015 to examine the main determinants of loan loss provision (LLP), which are classified as either discretionary (income smoothing, capital management, signalling) or non-discretionary (related to the business cycle). The possible effects of the double-dip recession of 2008-9 and 2011-15 are also examined. The results suggest that LLP in Italian banks is countercyclical, with non-discretionary components and macroeconomic shocks playing a significant role. Moreover, LLP is less cyclical in the case of local banks, since their loans are more collateralized and their behaviour is more strongly affected by supervisory activity.
ISSN: 1544-6123
Appears in Collections:Dept of Economics and Finance Research Papers

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