Suchergebnisse

A sound banking system is essential to a well-functioning economy. With the financial crisis beginning in 2007, a renewed interest in the safety of financial institutions has dominated both the political and financial landscape. Mounting loan losses in real estate lending led to the failing of over 460 banks from 2008 to 2012. This crisis is not unique; in fact, the Savings & Loan Crisis of the 1980's to early 1990's led to the closure of 700 savings institutions. Both instances created a panic in financial markets and heavy losses to deposit insurance funds. These losses are ultimately borne by taxpayers and prudently managed banks, especially if the insurance fund requires re-capitalization. The focus of this paper is on explaining the contributing factors to different categories of loan losses. Namely, total loan losses, residential real estate loan losses, commercial real estate loan losses, and commercial and industrial loan losses are examined. A multivariate regression approach is taken in this paper to explain the four rates of loan losses for the period of 2001 to 2012. Aggregate macroeconomic data from 2001 to 2012 is used to explain loan losses across categories. It was found that the delinquency rate of loans, the consumer financial obligations ratio, and the financial crisis were all significant factors in explaining loan losses. ; 2013-05-01 ; B.S.B.A. ; Business Administration, Dept. of Finance ; Bachelors ; This record was generated from author submitted information.

Several studies have addressed, with conflicting results, the issue of procyclical effects of loan loss provisions in the past. More recently, the weak performance of incurred loss models in the financial crisis has given rise to a new debate on the sound design of credit risk provisioning schemes, which is reflected in the scheduled implementation of an expected loss model in IFRS 9. This study contributes to the extant literature by separately analyzing the cyclical effects of specific and general loan loss provisions under a legislative framework that allows provisions based on expected losses in the loan portfolio. Using three different measures of forward-looking provisioning, we find typical German banks, most of them unlisted and operating regionally, to use specific loan loss provisions countercyclically, in particular for earnings management and by anticipating non-performing loans at the closing date. The use of general loan loss provisions is predominantly motivated by tax considerations, pointing out the considerable importance of the impact of local tax law.