Publication: Bank Loan Classification and Provisioning Practices in Selected Developed and Emerging Countries
This report reviews loan classification and provisioning practices in a broad sample of countries that differ in size, location and level of financial development. The survey conducted for the report compares the regulatory approaches adopted by industrial and emerging economies, and is intended to complement other sources of information that focus exclusively on either industrial or developing countries. It covers classification of individual and multiple loans, treatment of guarantees, collateral and restructured loans, bank loans review processes, loan loss provisioning, tax treatment of loan loss provisions, disclosure standards, and external auditors' role. Differences in provisioning and classification approaches have often made difficult a comparison of bank and banking system weaknesses across regulatory regimes. Poor classification and provisioning practices have led to solvency ratios that gave a false sense of security, as occurred when seemingly adequately capitalized financial systems failed in the 1990s. Successful regulatory harmonization therefore requires a set of minimum standards for loan classification that is grounded in sound risk management practices, but that is also sufficiently general to recognize differences in national economic and legal environment. The evidence this report provides is intended to contribute to this difficult task.
Link to Data Set
“Laurin, Alain; Majnoni, Giovanni. 2003. Bank Loan Classification and Provisioning Practices in Selected Developed and Emerging Countries. World Bank Working Paper;No. 1. © Washington, DC: World Bank. http://hdl.handle.net/10986/15157 License: CC BY 3.0 IGO.”
Other publications in this report series
PublicationEnvironmental Implications of a Central Bank Digital Currency (CBDC)(Washington, DC : World Bank, 2022-07)Two-thirds of central banks in the East Asia and Pacific (EAP) region have started researching or testing the implementation of a Central Bank Digital Currency (CBDC). At the same time, the region accounts for one-third of world CO2 emissions and is vulnerable to climate risks. As the Group of 7 (G7), European Central Bank (ECB), and Bank of England (BoE) have stated in their public statements, it is increasingly important to consider environmental impact when designing CBDC. However, only a few brief studies have been done on this subject, which will be crucial for the region. This Note explores the environmental implications of CBDC by comparing technical mechanisms and energy consumption within its distributed structure. It also illustrates differences in ecological footprint between CBDC and other payment methods (cryptocurrency, cash, and card networks). As the legitimacy of CBDC is backed by the trust of central banks, CBDC does not need to prove its legitimacy through its technological structure. Therefore, CBDC does not require the energy-intensive consensus or mining mechanisms used by a cryptocurrency, so its energy consumption is lower (comparable to that of a credit card system). CBDC can be designed to use various systems, such as Real Time Gross Settlement (RTGS), Distributed Ledger Technology (DLT), or a mixture of both. Careful deliberation to meet the objectives and implications will be important as CBDC can be a catalyst for financial innovation.
PublicationA Novel Tobacco Market Diversification: Unsmoking Rich Countries while Smoking Low-and-Middle Income Countries(World Bank, Washington, DC, 2022-04-27)In this working paper, an exploration of available data and information is conducted and findings presented, to support the view that the dichotomous business model and related harm reduction narrative promoted nowadays by the tobacco industry, merits scrutiny by the international community. The promotion of e-cigarettes as welfare enhancing in rich countries, particularly because they are posited to help adult smokers quit, tends to obfuscate a dire reality. The same tobacco industry that promotes (e-cigarettes as harm reduction in rich countries, derives the bulk of its profits by selling cigarettes in lower income countries.
PublicationThe Role of Coherence in Strengthening Community Accountability for Remote Schools in Indonesia(World Bank, Washington, DC, 2022-04)Incoherence in accountability relationships, or the lack of alignment between the various components of a specific education system, can hamper the quality of education. Such incoherence can be a particular challenge in resource constrained, remote villages where teachers tend to have higher educational capital and social status than the parents and communities whom they serve. We analyzed quantitative and qualitative data from a randomized controlled trial of a social accountability mechanism (SAM) for primary schools in remote Indonesian villages. The intervention had three treatment groups, all of which included the SAM, that engaged village-level stakeholders in a consensus-building process that led to joint service agreements for supporting the learning process. Prior analyses have found that all three treatment groups significantly improved student learning, but the treatment group combining the SAM with teacher performance pay based on camera-monitored teacher attendance led to much larger gains than the SAM-only treatment group or the treatment group combining the SAM with teacher performance pay based on a community-evaluated scorecard. Drawing on a range of quantitative data sources across all treatment group schools (process monitoring, survey, and service agreement indicators) and qualitative data from nine case study schools (interviews and focus group discussions), we show first that the student learning gains across all three treatment groups were accompanied by increases in both the coherence of the accountability relationships between village-level stakeholders and the degree to which these relationships were oriented toward the purpose of cultivating learning. We further show that the treatment group combining the SAM with camera monitored teacher attendance led to greater improvements in the coherence of accountability relationships than the other treatment groups, because the cameras improved both the technical capacity and the social legitimacy of community members to hold teachers accountable. This coherence-focused, relational explanation for the relative effectiveness of the treatment groups has more explanatory power than alternative explanations that focus narrowly on information quality or incentive structure. Our analysis reinforces arguments for ensuring that accountability structures are coherent with the local context, including local social structures and power dynamics.
PublicationStructured Lesson Plans for Literacy Instruction: A Compendium of Global Resources - A Collection of Early-Grade Teaching and Learning Materials in 40+ Languages(World Bank, Washington, DC, 2022-03-31)Literacy is the cornerstone of education, and a driver of human economic, social, and civic wellbeing. Despite its importance, far too many children fail to become literate. The World Bank uses a measure called learning poverty to indicate when a child cannot read and understand an age-appropriate text by age ten. The best available data showed that more than two-thirds of children in low- and middle-income countries suffer learning poverty. The World Bank is committed to helping countries achieve the learning target: to cut learning poverty by at least half by 2030. Achieving better outcomes in literacy requires a comprehensive effort in many domains. One of the most important is ensuring that students and teachers have and use high-quality instructional materials, especially textbooks, for reading instruction. As countries and systems review their literacy teaching and learning materials, they will want to compare them to the materials from other countries and systems. The purpose of the compendium is to allow such reviews and comparisons by grouping a critical mass of structured pedagogy lesson plans and related materials in one place.
PublicationWBG COVID-19 Crisis Response Operational Update: Delivering on the WBG Twin Goals in an Era of Compounding Crises(Washington, DC, 2022-03-31)This note provides an update on the WBG’s COVID-19 Crisis Response, outlined in June 2020 to help developing countries address the impacts of the pandemic while maintaining a line of sight to long-term development goals. It comprises five short sections: (I) the impacts of COVID-19 and compounding crises on developing countries, (II) an update on the WBG’s operational crisis response and priorities moving forward, (III) the critical role of international coordination, (IV) WBG financing framework for GRID, and (V) concluding remarks.