Credit Cycles, Credit Risk and Countercyclical Loan Provisions

Martha López, Fernando Tenjo Galarza () and Hector Zarate-Solano

No 11092, Borradores de Economia from Banco de la Republica

Abstract: In this paper we investigate the impact of rapid credit growth on ex ante credit risk. We present micro-econometric evidence of the positive relationship between rapid credit growth and deterioration in lending portfolios: Loans granted during boom periods have higher probability of default than those granted during periods of slow credit growth. In addition, given their importance for macroprudential policy, we evaluate the effectiveness of the implementation of the countercyclical loan provisions. We find a negative relationship between the amplitude of credit cycles and this kind of macroprudential tool.

Keywords: Ex ante credit risk; credit cycles; countercyclical provisioning (search for similar items in EconPapers)
JEL-codes: E32 E51 E60 G18 G21 (search for similar items in EconPapers)
Pages: 26
Date: 2013-11-05
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http://www.banrep.gov.co/sites/default/files/publicaciones/archivos/be_788.pdf

Related works:
Journal Article: Credit Cycles, Credit Risk and Countercyclical Loan Provisions (2014)
Journal Article: Credit Cycles, Credit Risk and Countercyclical Loan Provisions (2014)
Working Paper: Credit Cycles, Credit Risk and Countercyclical Loan Provisions (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000094:011092

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