Forward Looking Loan Provisions: Credit Supply and Risk-Taking


  • Discussion Paper Tilburg University


  • We show corporate-level real, financial, and (bank) risk-taking effects associated with calculating loan provisions based on expected-rather than incurred-credit losses. For identification, we exploit unique features of a Colombian reform and supervisory, matched loan-level data. The regulatory change induces a dramatic increase in provisions. Banks tighten all new lending conditions, adversely affecting borrowing-firms, with stronger effects for risky-firms. Moreover, to minimize provisioning, more affected (less-capitalized) banks cut credit supply to risky-firms- SMEs with shorter credit history, less tangible assets or more defaulted loans-but engage in "search-for-yield" within regulatory constraints and increase portfolio concentration, thereby decreasing risk diversification

fecha de publicación

  • 2020

Líneas de investigación

  • ECL
  • IFRS9
  • Loan provisions
  • bank risk-taking
  • corporate real and credit supply effects of accounting


  • 2020-027