Publication: Bank Loan Classification and Provisioning Practices in Selected Developed and Emerging Countries
Date
2003
ISSN
Published
2003
Author(s)
Laurin, Alain
Majnoni, Giovanni
Abstract
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
Citation
“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.”
Report Series
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