Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • Forthcoming
  • Article
  • Journal of Financial Intermediation

Countercyclical Prudential Buffers and Bank Risk-taking

By: Joseph Pacelli, Manuel Illueca Muñoz, Lars Norden and Gregory F. Udell
  • Format:Print
ShareBar

Abstract

We investigate the effects of countercyclical prudential buffers on bank risk-taking. We exploit the introduction of dynamic loan loss provisioning in Spain, mandating that banks use historical average loss rates in their estimation of loan loss provisions. We find that dynamic loan loss provisioning is associated with reductions in timely loan loss provisioning. Banks that previously recognized loan losses in a timely fashion exhibit the greatest reductions in timeliness and consequently extend loans to riskier borrowers with lower accounting quality. Our results have policy implications for the debate on the use of financial reporting requirements in mitigating capital pro-cyclicality.

Keywords

Banks; Bank Regulation; Macroprudential Policies; Bank Lending; Loan Loss Provisioning; Risk Taking; Banks and Banking; Financing and Loans; Governing Rules, Regulations, and Reforms; Risk and Uncertainty

Citation

Pacelli, Joseph, Manuel Illueca Muñoz, Lars Norden, and Gregory F. Udell. "Countercyclical Prudential Buffers and Bank Risk-taking." Journal of Financial Intermediation (forthcoming).
  • Find it at Harvard

About The Author

Joseph Pacelli

Accounting and Management
→More Publications

More from the Authors

    • July 2022
    • Faculty Research

    Call of Fiduciary Duty: Microsoft Acquires Activision

    By: Joseph Pacelli, Jonas Heese and James Barnett
    • 2021
    • Faculty Research

    Do Job Seekers Value Diversity Information? Evidence from a Field Experiment

    By: Joseph Pacelli, Jung Ho Choi, Kristina M. Rennekamp and Sorabh Tomar
    • 2021
    • Faculty Research

    Dirty Money: How Banks Influence Financial Crime

    By: Joseph Pacelli, Janet Gao, Jan Schneemeier and Yufeng Wu
More from the Authors
  • Call of Fiduciary Duty: Microsoft Acquires Activision By: Joseph Pacelli, Jonas Heese and James Barnett
  • Do Job Seekers Value Diversity Information? Evidence from a Field Experiment By: Joseph Pacelli, Jung Ho Choi, Kristina M. Rennekamp and Sorabh Tomar
  • Dirty Money: How Banks Influence Financial Crime By: Joseph Pacelli, Janet Gao, Jan Schneemeier and Yufeng Wu
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College