• norsk
    • English
  • English 
    • norsk
    • English
  • Login
View Item 
  •   Home
  • Norges Handelshøyskole
  • Thesis
  • Master Thesis
  • View Item
  •   Home
  • Norges Handelshøyskole
  • Thesis
  • Master Thesis
  • View Item
JavaScript is disabled for your browser. Some features of this site may not work without it.

Bank capital management: an examination of loan loss provisions under regulatory pressure : an empirical study of the Nordic banking sector

Fagernes, Lars Magnus; Nygård, Ida Eilertsen
Master thesis
Thumbnail
View/Open
masterthesis.PDF (1.336Mb)
URI
http://hdl.handle.net/11250/2407452
Date
2016
Metadata
Show full item record
Collections
  • Master Thesis [4657]
Abstract
We study whether and how capital regulation affects banks’ loan loss provisions. Using

handpicked data on 46 Nordic banks, we find that banks use discretion to reduce loan loss

provisions for regulatory capital management purposes. Exercising discretion to reduce

provisions shifts capital from the expected loss buffer to the unexpected loss buffer at the

expense of banks’ overall ability to absorb loan losses. Controlling for non-discretionary

determinants of loan loss provisions, we find that banks reduce provisions when an increase

in capital requirements puts pressure on eligible capital for regulatory purposes. Additionally,

we find that banks’ regulatory capital position influences provisioning behavior. We show

that a stronger regulatory capital position coming into the year yields higher levels of loan

loss provisions, while an improvement in regulatory capital position during the year

constitutes a reduction in loan loss provisions. When studying SIFI-banks and IRB-banks, we

find no evidence indicating that newly enacted regulations are effective in limiting

discretionary provisions for regulatory purposes. Our analyses indicate that banks exercise

discretionary provisioning behavior when circumventing regulatory capital requirements.

Contact Us | Send Feedback

Privacy policy
DSpace software copyright © 2002-2019  DuraSpace

Service from  Unit
 

 

Browse

ArchiveCommunities & CollectionsBy Issue DateAuthorsTitlesSubjectsDocument TypesJournalsThis CollectionBy Issue DateAuthorsTitlesSubjectsDocument TypesJournals

My Account

Login

Statistics

View Usage Statistics

Contact Us | Send Feedback

Privacy policy
DSpace software copyright © 2002-2019  DuraSpace

Service from  Unit