Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249948 
Year of Publication: 
2021
Citation: 
[Journal:] Review of Economic Perspectives [ISSN:] 1804-1663 [Volume:] 21 [Issue:] 3 [Publisher:] De Gruyter [Place:] Warsaw [Year:] 2021 [Pages:] 235-258
Publisher: 
De Gruyter, Warsaw
Abstract: 
In this paper, we estimate the sustainable level of lifetime expected credit losses and provisions and assess the procyclicality of banks' credit losses and provisions in the Czech Republic. Further, we discuss the implications of the results for provisioning in stage 3 under the IFRS 9. Based on the estimation results, we can identify periods of insufficient provisioning when the actual values were below the sustainable levels. Addi-tionally, we show that credit losses and provisions behave procyclically (i.e., decrease with a rising output gap and increase with a falling output gap) while banks recognize impaired credit losses and create provisions with a delay of three to four quarters after the output gap starts shrinking. Such a delay may result in a sharp increase in lifetime ex-pected credit losses and provisioning in response to a deterioration in economic condi-tions under the IFRS 9 regime.
Subjects: 
Credit losses
IFRS 9
procyclicality
provisions
JEL: 
C22
E32
G21
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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