Dynamic Loan Loss Provisioning

Download or read book Dynamic Loan Loss Provisioning written by Torsten Wezel and published by International Monetary Fund. This book was released on 2012-05-01 with total page 105 pages. Available in PDF, EPUB and Kindle. Book excerpt: This simulation-based paper investigates the impact of different methods of dynamic provisioning on bank soundness and shows that this increasingly popular macroprudential tool can smooth provisioning costs over the credit cycle and lower banks’ probability of default. In addition, the paper offers an in-depth guide to implementation that addresses pertinent issues related to data requirements, calibration and safeguards as well as accounting, disclosure and tax treatment. It also discusses the interaction of dynamic provisioning with other macroprudential instruments such as countercyclical capital.