Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278673 
Year of Publication: 
2023
Series/Report no.: 
ECB Working Paper No. 2841
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We analyse the impact of the adoption of expected credit loss accounting (IFRS 9) on the timeliness and potential procyclicality of banks' loan loss provisioning. We use granular loan-level data from the euro area's credit register and investigate both firm-level credit events and macroeconomic shocks (2020 COVID-19 pandemic, 2022 energy price shock). We find that provisions under the new standard are higher before default and more responsive to shocks. However, the majority of provisioning still occurs at the time of default and the dynamics around default events are similar to pre-existing national standards. Additionally, banks with a larger capital headroom provision significantly more, particularly for loans using IFRS 9. This suggests a higher risk of underprovisioning for less capitalized banks.
Subjects: 
bank regulation
financial stability
loan loss accounting
credit risk
JEL: 
G21
G28
G32
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6126-4
Document Type: 
Working Paper

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