Logo
Munich Personal RePEc Archive

Credit Cycles, Credit Risk, and Prudential Regulation

Jesus, Saurina and Gabriel, Jimenez (2006): Credit Cycles, Credit Risk, and Prudential Regulation. Published in: International Journal of Central Banking , Vol. Volume, No. Number 2 (5 July 2006): pp. 65-98.

[thumbnail of MPRA_paper_718.pdf]
Preview
PDF
MPRA_paper_718.pdf

Download (341kB) | Preview

Abstract

This paper finds strong empirical support of a positive, although quite lagged, relationship between rapid credit growth and loan losses. Moreover, it contains empirical evidence of more lenient credit standards during boom periods, both in terms of screening of borrowers and in collateral requirements. We find robust evidence that during upturns, riskier borrowers get bank loans, while collateralized loans decrease. We develop a regulatory prudential tool, based on a countercyclical, or forward-looking, loan loss provision that takes into account the credit risk profile of banks’ loan portfolios along the business cycle. Such a provision might contribute to reinforce the soundness and the stability of banking systems.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.