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Book Cover
Author Wezel, Torsten, author

Title Dynamic loan loss provisions in Uruguay : properties, shock absorption capacity and simulations using alternative formulas / prepared by Torsten Wezel
Published [Washington, D.C.] : International Monetary Fund, [2010]
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Description 1 online resource (22 pages) : color illustrations
Series IMF working paper ; WP/10/125
IMF working paper ; WP/10/125
Contents Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. The Uruguayan System of Dynamic Provisioning; 1. Bank Loans and Dynamic Provisions; 2. Share of Specific and Dynamic Provisions in Total Loans; 3. Evolution of Dynamic Provisions With and Without Loan Losses; 4. Effect of Dynamic Provisioning on the Return on Assets; III. The Sufficiency of Dynamic Provisions under Macroeconomic Shocks; A. Empirical Approach; B. Simulation Results; 1. Set of Shocks Depleting the Stocks of Dynamic Provisions; 2. Coverage of Expected Loan Losses under Different Stress Test Scenarios
IV. Simulations Using Alternative Provisioning FormulasA. Characteristics of Alternative Formulas; B. Simulation Results; 5. Stock of Uruguayan Dynamic Provisions Under Different Formulas; 3. Correlations Between Provisioning Flows and Changes in Credit & Activity, 2004-09; V. Conclusions; References; Footnotes
Summary This paper assesses the merits of countercyclical loan loss provisioning in Uruguay. Using a stress test methodology, it quantifies the protection against macroeconomic shocks provided by the stock of dynamic provisions accumulated since 2001 and finds that medium-sized shocks would be fully absorbed, offsetting the additional costs caused by rising specific provisions. In addition, the paper simulates the path of dynamic provisions under the formulas used in Spain, Peru and Bolivia, showing that the alternative paths diverge significantly from the actual buildup and in part better conform to the Uruguayan credit cycle
Notes At head of title: Monetary and Capital Markets Department
Bibliography Includes bibliographical references (pages 21-22)
Notes Print version record
Subject Loan loss reserves -- Bolivia -- Econometric models.
Loan loss reserves -- Peru -- Econometric models.
Loan loss reserves -- Spain -- Econometric models.
Loan loss reserves -- Uruguay -- Econometric models.
Form Electronic book
Author International Monetary Fund. Monetary and Capital Markets Department, issuing body
ISBN 1282846027
1455200301 (E-Book)