Countercyclical prudential buffers and bank risk-taking
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Other documents of the author: Illueca, Manuel; Norden, Lars; Pacelli, Joseph; Udell, Gregory F.
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comunitat-uji-handle2:10234/8648
comunitat-uji-handle3:10234/8649
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https://doi.org/10.1016/j.jfi.2022.100961 |
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Title
Countercyclical prudential buffers and bank risk-takingDate
2022-01-31Publisher
ElsevierISSN
1042-9573; 1096-0473Bibliographic citation
Illueca, M., Norden, L., Pacelli, J., & Udell, G. F. (2022). Countercyclical prudential buffers and bank risk-taking. Journal of Financial Intermediation, 100961.Type
info:eu-repo/semantics/articleVersion
info:eu-repo/semantics/publishedVersionSubject
Abstract
We investigate the effects of countercyclical prudential buffers on bank risk-taking. We exploit the introduction of dynamic loan loss provisioning in Spain, mandating that banks use historical average loss rates in ... [+]
We investigate the effects of countercyclical prudential buffers on bank risk-taking. We exploit the introduction of dynamic loan loss provisioning in Spain, mandating that banks use historical average loss rates in their estimation of loan loss provisions. We find that dynamic loan loss provisioning is associated with reductions in timely loan loss provisioning. Banks that previously recognized loan losses in a timely fashion exhibit the greatest reductions in timeliness and consequently extend loans to riskier borrowers with lower accounting quality. Our results have policy implications for the debate on the use of financial reporting requirements in mitigating capital pro-cyclicality. [-]
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Journal of Financial Intermediation. Volume 51, July 2022, 100961Rights
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