Publication: Dynamic Provisioning
Date
2009-07
ISSN
Published
2009-07
Author(s)
Saurina, Jesus
Abstract
Dynamic loan loss provisions can help
deal with procyclicality in banking. By allowing earlier
detection and coverage of credit losses in loan portfolios,
they enable banks to build up a buffer in good times that
can be used in bad times. Their anticyclical nature enhances
the resilience of both individual banks and the banking
system as a whole. While there is no guarantee that they
will be enough to cope with all the credit losses of a
downturn, dynamic provisions have proved useful in Spain
during the current financial crisis. They could be an
important prudential tool for emerging economies, where
banks dominate financial intermediation.
Citation
“Saurina, Jesus. 2009. Dynamic Provisioning. Crisis Response Note; No. 7. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/3f2d93a2-a4c3-5850-9a38-c3cf0129f0f0 License: CC BY 3.0 IGO.”