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2017 | OriginalPaper | Chapter

18. Credit Loss Provisions as a Macro-prudential Tool

Authors : Nombulelo Gumata, Eliphas Ndou

Published in: Bank Credit Extension and Real Economic Activity in South Africa

Publisher: Springer International Publishing

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Abstract

  • • Assess how weak growth in credit can be linked to elevated credit loss provisions as macro-prudential tool
  • • Understand the extent to which provisions have been a driver of business cycle fluctuations in South Africa
  • • Distinguish how credit provisions can be classified into low and high regimes
  • • Consider how credit provisions shocks impact real economic activity in a nonlinear way
  • • Assess how tighter provisioning for credit losses makes monetary policy adjustments need to be less aggressive to curb positive inflation surprises
  • • Understand how elevated policy rates accentuate the adverse effects of tighter credit loan loss provisions on credit contractions

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previous chapter Excess Capital Adequacy and Liquid Asset Holdings and Credit
next chapter The National Credit Act, Monetary Policy and Credit Growth
Appendix
Available only for authorised users
Footnotes
1
This includes limits on net open currency positions and limits on maturity mismatch.
 
2
This includes countercyclical or time-varying capital requirements and time-varying or dynamic provisioning.
 
3
The changeover is expected to be effective in 2018 (Pool et al. 2015.
 
4
The significance of these responses to one positive standard deviation credit provisioning shock is shown in Fig. A.18.1.
 
Literature
Blanchard, O., Dell’Ariccia, G., & Mauro, P. (2010). Rethinking macroeconomic policy (IMF Staff Position Note. SPN/10/03).
Bouvatier, V., & Lepetit, L. (2012). Provisioning rules and bank lending: A theoretical model. Journal of Financial Stability, 8, 25–31.CrossRef
Christiano, L. J., Eichenbaum, M., & Evans, C. L. (1999). Monetary policy shocks: What have we learned and to what end? In J. B. Taylor, & M. Woodford (Eds.), Handbook of macroeconomics (Vol. 1., Chap. 2, pp. 65–148). Elsevier.
Lim, C., Columba, F., Costa, A., Kongsamut, P., Otani, A., Saiyid, M., Wezel, T., & Wu, X. (2011). Macroprudential policy: What instruments and how to use them? Lessons from Country Experiences (IMF working paper WP/11/238)
Pool, S., de Haan, L., & Jacobs, J. P. A. M. (2015). Loan loss provisioning, bank credit and the real economy. Journal of Macroeconomics, 45, 124–136.CrossRef
Zilberman, R., & Tayler, W. J. (2014). Financial shocks, loan loss provisions and macroprudential stability (Economics working paper series No. 23). Bailrigg: Lancaster University.
Metadata
Title
Credit Loss Provisions as a Macro-prudential Tool
Authors
Nombulelo Gumata
Eliphas Ndou
Copyright Year
2017
Book
Bank Credit Extension and Real Economic Activity in South Africa

Print ISBN: 978-3-319-43550-3

Electronic ISBN: 978-3-319-43551-0

Copyright Year: 2017

DOI
https://doi.org/10.1007/978-3-319-43551-0_18