The Cyclicality of Loan Loss Provision in Brazilian Commercial Banks

ABSTRACT Debates on banking regulation have increasingly given rise to a discussion on the relationship between the loan loss provision and business cycles. Provisioning rules for credit losses for banks in Brazil have mixed system characteristics, which could theoretically lead banks to pro-cyclical or countercyclical behavior, which reinforces the need for research to indicate what has actually been the effect of these provisions in the economy. The purpose of this paper is to analyze the relationship between banks’ provisioning for credit losses and business cycles in Brazil, in an attempt to confirm its nature, a condition capable of avoiding potentiating the effects of economic contraction or expansion. Using an econometric model with accounting and macroeconomic variables, the survey involved 91 commercial banks in the period from 2001 to 2012. Confirming that the delay in payments of principal and charges is a key condition for the recognition of banking provisions in Brazil, which highlights its predominantly retrospective nature, the results point to the existence of a pro-cyclical behavior by the banks surveyed, indicating that when GDP is on the rise, provisions tend to fall and vice versa.

摘要：关于银行监管的讨论日益聚焦于贷款损失准备（loan loss provision）与商业周期（business cycles）之间的关联。巴西银行信贷损失（credit losses）拨备规则兼具混合体系特征，理论上可能导致银行呈现顺周期（pro-cyclical）或逆周期（countercyclical）行为，这进一步凸显了开展研究以明确此类拨备对经济实际影响的必要性。本文旨在分析巴西银行信贷损失拨备与商业周期之间的关联，以确认其作用性质，从而规避放大经济收缩或扩张效应的风险。本研究采用包含会计变量与宏观经济变量的计量模型（econometric model），调查样本涵盖2001年至2012年间的91家商业银行（commercial banks）。研究结果证实，本金与费用的支付逾期是巴西银行确认拨备的关键前提，这体现了其拨备规则显著的回溯性特征；同时结果表明，受访银行存在顺周期行为：即国内生产总值（GDP）增长时拨备规模趋于下降，反之则上升。