Arbeitspapier

Identifying the provisioning policies of Belgian banks

Loan loss reserves make up an essential part of a bank's soundness and more generally its viability. An under-provisioned reserve account implies that capital ratios may overstate a bank's ability to absorb future losses. For this reason, both supervisory authorities and investors regularly assess the adequacy of the loan loss provisions alongside the more popular capital ratios. The aim of the paper is to identify what motivates the loss provisioning policies employed by Belgian banks, especially whether banks use provisioning to inter-temporally smooth their earnings or capital positions. Owing to the relatively long data series, the paper also investigates whether the introduction of the IAS-39 "incurred loss" accounting standards or the onset of the financial crisis in 2008/9 had any impact on the provisioning decisions. The results show that provisioning practices of Belgian banks have been rather tightly linked to future losses, although the relationship has weakened considerably after the introduction of the IAS-39 standards and, to a lesser extent, after the financial crisis. There is also evidence that Belgian banks might have used provisioning decisions to manage their current earnings and to some extent to signal future profitability, although the latter motive also appears to have weakened after the introduction of IAS-39 standards.

Sprache
Englisch

Erschienen in
Series: NBB Working Paper ; No. 326

Klassifikation
Wirtschaft
Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
Information and Market Efficiency; Event Studies; Insider Trading
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Financial Institutions and Services: Government Policy and Regulation
Accounting
Thema
Belgian credit institutions
loan loss provisioning
event-based provisioning
forward-looking provisioning
earnings-smoothing
cyclical provisioning
implementation of international accounting standards

Ereignis
Geistige Schöpfung
(wer)
Arbak, Emrah
Ereignis
Veröffentlichung
(wer)
National Bank of Belgium
(wo)
Brussels
(wann)
2017

Handle
Letzte Aktualisierung
10.03.2025, 11:45 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Arbak, Emrah
  • National Bank of Belgium

Entstanden

  • 2017

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