Krueger, Steffen and Roesch, Daniel and Scheule, Harald (2018) The impact of loan loss provisioning on bank capital requirements. JOURNAL OF FINANCIAL STABILITY, 36. pp. 114-129. ISSN 1572-3089, 1878-0962
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This paper shows that the revised loan loss provisioning based on the International Financial Reporting Standards (IFRS) and the US Generally Accepted Accounting Principles (GAAP) implies a reduction of Tier 1 capital. The paper finds in a counterfactual analysis that these changes are more severe (i) during economic downturns, (ii) for credit portfolios of low quality, (iii) for banks that do not tighten capital standards during downturns, and (iv) under a more comprehensive definition of significant increase in credit risk (SICR) under IFRS. The provisioning rules further increase the procyclicality of bank capital requirements. Adjustments of the SICR threshold or capital buffers are suggested as ways to mitigate a regulatory pressure that may emerges due to the reduction of regulatory capital. (C) 2018 Elsevier B.V. All rights reserved.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | BASEL-II; CREDIT RISK; DETERMINANTS; CYCLICALITY; RATES; GAAP 326; IFRS 9; Lifetime expected loss; Loan loss provisioning; Regulatory capital; SICR |
| Subjects: | 300 Social sciences > 330 Economics |
| Divisions: | Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Statistik und Risikomanagement (Prof. Dr. Rösch) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 09 Mar 2020 10:43 |
| Last Modified: | 09 Mar 2020 10:43 |
| URI: | https://pred.uni-regensburg.de/id/eprint/14442 |
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