Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108734
Authors: 
Caporale, Guglielmo Maria
Alessi, Matteo
Di Colli, Stefano
Lopez, Juan Sergio
Year of Publication: 
2015
Series/Report no.: 
DIW Discussion Papers 1459
Abstract: 
This paper uses data from a panel of more than 400 Italian banks for the period 2001 - 2012 to examine the main determinants of loan loss provision (LLP), which are classified as either discretionary (income smoothing, capital management,signalling) or non-discretionary (related to the business cycle). The results suggest that LLP in Italian banks is driven mainly by non-discretionary components, especially during the recession of 2008-2012, and is consistent with a countercyclical behavior of LLP. Further, it is generally less pro-cyclical (although not during the recent economic crisis) in the case of local banks: since their loans are more collateralised, their behaviour is more strongly affected by supervisory activity, their initial coverage ratio being lower than for other banks.
Subjects: 
Loan Loss Provision
Bank Lending
Financial System Cyclicality
JEL: 
G21
G28
Document Type: 
Working Paper

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