Us Bank Loan-Loss Provisions, Economic Conditions, and Regulatory Guidance

Download or read book Us Bank Loan-Loss Provisions, Economic Conditions, and Regulatory Guidance written by William C. Handorf and published by . This book was released on 2006 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: We differentiate fundamental and discretionary loan-loss provisioning by specifying a balance sheet perspective model with two bank-specific variables and one external economic variable. Based on panel data of US commercial banks between 1990 and 2000, we find that on average, US banks are rational; that is, loan-loss provisions reflect current and projected bank losses. Average-sized banks are more forward-looking (anti-procyclical), which some researchers interpret as income smoothing. The smallest banks and the very largest banks that are quot;too big to failquot; are more backward-looking in provisioning, which some interpret as procyclical.