A Rating Migration Model for Loan Loss Provisions and Credit Cycles

2012 ◽  
Author(s):  
David Gruenberger
Keyword(s):  
Loan Loss ◽  
Migration Model ◽  
Credit Cycles ◽  
Loan Loss Provisions

The Effects of Policy Uncertainty on Bank Loan Loss Provisions

2021 ◽  
pp. 105575
Author(s):  
Dung Viet Tran ◽  
Reza Houston
Keyword(s):  
Bank Loan ◽  
Policy Uncertainty ◽  
Loan Loss ◽  
Loan Loss Provisions

Earnings management and equity incentives: evidence from the European banking industry

2019 ◽  
Vol 27 (2) ◽  
pp. 244-261 ◽  
Author(s):  
Mohammad Alhadab ◽  
Bassam Al-Own
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Banking Industry ◽  
Future Research ◽  
Loan Loss ◽  
Content Type ◽  
Loan Loss Provisions ◽  
Equity Incentives ◽  
European Banking ◽  
European Banks

Purpose This study aims to examine the effect of equity incentives on earnings management that occurs via the use of loan loss provisions by using a sample of 204 bank-year observations over the period 2006-2011. Design/methodology/approach The authors use the data of 39 European banks to test the main hypothesis. Several valuation models and regressions are used to measure the main proxies for executives’ compensation and the determinant factors of loan loss provisions. Findings The empirical results reveal that earnings management that occurs via discretionary loan loss provisions is associated with equity incentives in the banking industry. In particular, European banks’ executives with high equity incentives are found to manage reported earnings upwards by reducing loan loss provisions. The results therefore show that income-increasing earnings management via discretionary loan loss provisions is widely practised by the executives of European banks and that this is partly motivated by executives’ compensation. Practical implications The findings of this paper present important implications for regulators in the European Union, who should take further steps to reform the regulatory environment to monitor and mitigate the earnings management practices that occur via the manipulation of loan loss provisions. Earnings management practices do not just negatively affect subsequent performance but are also found to lead to firms’ failure. Thus, regulators should take the necessary reforms to protect the wealth of stakeholders (investors, creditors, etc.). Originality/value This study provides the first evidence on the relationship between equity incentives and earnings management in the European banking industry. The study sheds more light on an issue of great interest to a broad audience that does not receive much attention in the prior research, thus opening new avenues for future research.

Loan loss provisions, bank valuations and discretion: A comparative study between conventional and Islamic banks

2014 ◽  
Vol 103 ◽  
pp. S160-S173 ◽  
Author(s):  
Marwa Elnahass ◽  
Marwan Izzeldin ◽  
Omneya Abdelsalam
Keyword(s):  
Comparative Study ◽  
Islamic Banks ◽  
Loan Loss ◽  
Loan Loss Provisions ◽  
Conventional And Islamic Banks

Benchmarking and crosschecking international banking economic and regulatory capital

2005 ◽  
Vol 13 (1) ◽  
pp. 65-79 ◽  
Author(s):  
John L. Simpson ◽  
John Evans
Keyword(s):  
Banking System ◽  
Performance Model ◽  
Capital Adequacy ◽  
Future Research ◽  
Informational Efficiency ◽  
International Banking ◽  
Regulatory Capital ◽  
Loan Loss ◽  
Banking Systems ◽  
Loan Loss Provisions

The purpose of this paper is to provide banking regulators with another tool to crosscheck the appropriateness and consistency of levels of capital adequacy for banks. The process begins by examining banking systems and focuses on market risks and the systemic risks associated with growing global economic integration and associated systemic interdependence. The model provides benchmarks for economic and regulatory capital for international banking systems using country, regional and global stock‐market generated price index returns data. The benchmarks can then be translated to crosschecking capital levels for banks within those systems. For analytical purposes systems are assumed to possess a degree of informational efficiency and credit, liquidity and operational risks are held constant or at least assumed to be covered in loan loss provisions. An empirical study is included that demonstrates how market risk and systemic risk can be accounted for in a benchmark banking system performance model. Full testing of the model is left for future research. The paper merely proposes that such an approach is feasible and useful and it is in no way intended to be a replacement for the current Basel Accord.

Loan Loss Provisions, Income Smoothing and Loan Growth: Evidence from Islamic Banks

2016 ◽  
Author(s):  
Sigid Eko Pramono ◽  
Hilda Rosieta ◽  
Wahyoe Soedarmono
Keyword(s):  
Income Smoothing ◽  
Islamic Banks ◽  
Loan Loss ◽  
Loan Loss Provisions ◽  
Loan Growth

scholarly journals The Procyclicality of Loan Loss Provisions in Islamic Banks

2016 ◽  
Author(s):  
Wahyoe Soedarmono ◽  
Sigid Eko Pramono ◽  
Amine Tarazi
Keyword(s):  
Islamic Banks ◽  
Loan Loss ◽  
Loan Loss Provisions

The Determinants of Loan Loss Provisions: An Analysis of the Greek Banking System in Light of the Sovereign Debt Crisis

2017 ◽  
pp. 181-225
Author(s):  
Platon Monokroussos ◽  
Dimitrios Thomakos ◽  
Thomas A. Alexopoulos ◽  
Eleni Lydia Tsioli
Keyword(s):  
Sovereign Debt ◽  
Debt Crisis ◽  
Banking System ◽  
Sovereign Debt Crisis ◽  
Loan Loss ◽  
Loan Loss Provisions

scholarly journals Does the New European Banking Regulation discourage Earnings Management?

2017 ◽  
Vol 10 (10) ◽  
pp. 45 ◽  
Author(s):  
Giuseppe Di Martino ◽  
Grazia Dicuonzo ◽  
Graziana Galeone ◽  
Vittorio Dell'Atti
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Banking Sector ◽  
Banking Regulation ◽  
Regulatory Framework ◽  
Loan Loss ◽  
Minimum Capital ◽  
Loan Loss Provisions ◽  
European Banking ◽  
Single Rulebook

In the recent past, the financial crisis has shown important lacks in the EU regulation relating to the banking sector, making the introduction of a unified regulatory framework necessary. Since June 2009 the European Council has recommended a “Single Rulebook”, that is a unique and harmonizing discipline applicable to all financial institutions in the Single Market, become effective on January 2014. This prudential discipline requires much more minimum capital, liquidity and information transparency and it defines format and minimum standards of contents.The aim of this research is to investigate the relation between the new mandatory disclosure and earnings management policies in banking sector realized through Loan Loss Provisions (LLP), the component of income statement mainly subject to manipulations, especially in form of earnings smoothing. Because the new integrated regulatory framework requires a more transparent disclosure, we expected that accruals manipulation (basically LLP) could be discouraged. The empirical analysis is based on a sample of 116 listed European banks over the period prior (2011-2012-2013) and after (2014-2015-2016) the effective date of the Single Rulebook. The evidence confirm our hypothesis suggesting that this banking reform discourages earnings manipulation and improves earnings quality, making financial reporting more useful for investors. The results are important to the regulatory institutions (such as European Union and European Central Bank) supporting more stringent discipline introduced by Basel III.

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