The Cyclicality of Loan Loss Provision in Brazilian Commercial Banks

Debates on banking regulation have increasingly given rise to a discussion on the relationship between the loan loss provision and business cycles. Provisioning rules for credit losses for banks in Brazil have mixed system characteristics, which could theoretically lead banks to pro-cyclical or cou...

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Autores principales:	Antônio Maria Henri Beyle de Araújo, Paulo Roberto Barbosa Lustosa, José Alves Dantas
Formato:	article
Lenguaje:	EN PT
Publicado:	FUCAPE Business School 2018
Materias:	llp cyclicality business cycle loans commercial banks Business HF5001-6182
Acceso en línea:	https://doaj.org/article/a14b3f70c5404249b6bbee725362f32c
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spelling	oai:doaj.org-article:a14b3f70c5404249b6bbee725362f32c2021-11-11T15:48:07ZThe Cyclicality of Loan Loss Provision in Brazilian Commercial Banks1807-734X10.15728/bbr.2018.15.3.3https://doaj.org/article/a14b3f70c5404249b6bbee725362f32c2018-01-01T00:00:00Zhttp://www.redalyc.org/articulo.oa?id=123056425003https://doaj.org/toc/1807-734XDebates on banking regulation have increasingly given rise to a discussion on the relationship between the loan loss provision and business cycles. Provisioning rules for credit losses for banks in Brazil have mixed system characteristics, which could theoretically lead banks to pro-cyclical or countercyclical behavior, which reinforces the need for research to indicate what has actually been the effect of these provisions in the economy. The purpose of this paper is to analyze the relationship between banks’ provisioning for credit losses and business cycles in Brazil, in an attempt to confirm its nature, a condition capable of avoiding potentiating the effects of economic contraction or expansion. Using an econometric model with accounting and macroeconomic variables, the survey involved 91 commercial banks in the period from 2001 to 2012. Confirming that the delay in payments of principal and charges is a key condition for the recognition of banking provisions in Brazil, which highlights its predominantly retrospective nature, the results point to the existence of a pro-cyclical behavior by the banks surveyed, indicating that when GDP is on the rise, provisions tend to fall and vice versa.Antônio Maria Henri Beyle de AraújoPaulo Roberto Barbosa LustosaJosé Alves DantasFUCAPE Business Schoolarticlellpcyclicalitybusiness cycleloanscommercial banksBusinessHF5001-6182ENPTBBR: Brazilian Business Review, Vol 15, Iss 3, Pp 246-261 (2018)
institution	DOAJ
collection	DOAJ
language	EN PT
topic	llp cyclicality business cycle loans commercial banks Business HF5001-6182
spellingShingle	llp cyclicality business cycle loans commercial banks Business HF5001-6182 Antônio Maria Henri Beyle de Araújo Paulo Roberto Barbosa Lustosa José Alves Dantas The Cyclicality of Loan Loss Provision in Brazilian Commercial Banks
description	Debates on banking regulation have increasingly given rise to a discussion on the relationship between the loan loss provision and business cycles. Provisioning rules for credit losses for banks in Brazil have mixed system characteristics, which could theoretically lead banks to pro-cyclical or countercyclical behavior, which reinforces the need for research to indicate what has actually been the effect of these provisions in the economy. The purpose of this paper is to analyze the relationship between banks’ provisioning for credit losses and business cycles in Brazil, in an attempt to confirm its nature, a condition capable of avoiding potentiating the effects of economic contraction or expansion. Using an econometric model with accounting and macroeconomic variables, the survey involved 91 commercial banks in the period from 2001 to 2012. Confirming that the delay in payments of principal and charges is a key condition for the recognition of banking provisions in Brazil, which highlights its predominantly retrospective nature, the results point to the existence of a pro-cyclical behavior by the banks surveyed, indicating that when GDP is on the rise, provisions tend to fall and vice versa.
format	article
author	Antônio Maria Henri Beyle de Araújo Paulo Roberto Barbosa Lustosa José Alves Dantas
author_facet	Antônio Maria Henri Beyle de Araújo Paulo Roberto Barbosa Lustosa José Alves Dantas
author_sort	Antônio Maria Henri Beyle de Araújo
title	The Cyclicality of Loan Loss Provision in Brazilian Commercial Banks
title_short	The Cyclicality of Loan Loss Provision in Brazilian Commercial Banks
title_full	The Cyclicality of Loan Loss Provision in Brazilian Commercial Banks
title_fullStr	The Cyclicality of Loan Loss Provision in Brazilian Commercial Banks
title_full_unstemmed	The Cyclicality of Loan Loss Provision in Brazilian Commercial Banks
title_sort	cyclicality of loan loss provision in brazilian commercial banks
publisher	FUCAPE Business School
publishDate	2018
url	https://doaj.org/article/a14b3f70c5404249b6bbee725362f32c
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_version_	1718433907913785344

The Cyclicality of Loan Loss Provision in Brazilian Commercial Banks

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