29 research outputs found
Non-performing loans: regulatory and accounting treatments of assets
No full textAsset quality is an essential part of sound banking. However, asset quality is difficult for banking regulators and investors to assess in the absence of a common, cross-border scheme to classify assets. Currently no standard is applied universally to classify loans, the most sizable asset on many banks’ balance sheets. As a corollary, no common definition of non-performing loans (NPLs) exists. This paper documents divergences in the definition of NPLs across countries, accounting regimes, firms and data sources. The paper’s originality is in attending to the legal, accounting, statistical, economic and strategic aspects of loan loss provisioning (LLP) and NPLs, topics that are multidisciplinary by nature but have not been dealt with in the literature in an integrated fashion before. Since the 2007 Great Financial Crisis (GFC), accounting bodies and prudential regulators are increasingly focused on early recognition of credit losses and enhanced disclosure. A common approach to NPL recognition might complement these initiatives
Replication package for: "Dating the Lender of Last Resort"
No full textRieder, K., Anson, M., Bholat, D. & Thomas, R. (2022). Dating the Lender of Last Resort. The Economic Journal
Focus is needed on improving central bank forecasts
No full textOn August 7, David Bholat suggested that it was ‘Time to pay policy-makers based on their performance’. Like all good economists, Bholat has been keen to adjust incentives so that those involved are encouraged to perform better, in this case the senior members of the monetary policy committee (MPC). While his intention was good, I think his target was misdirected, and could be improved
Non-performing loans at the dawn of IFRS 9: Regulatory and Accounting Treatment of Asset Quality
No full textAsset quality is a key indicator of sound banking. However, it is difficult for banking regulators and investors to assess it in the absence of a common, cross-border scheme to classify assets. Currently no standard is applied universally to categorise loans, the most sizeable asset on banks’ balance sheets. As a corollary, definitions of nonperforming loans (NPLs), despite recent steps towards greater harmonisation, continue to vary between jurisdictions. This paper offers a comprehensive analysis of NPLs and considers variations in the treatment of NPLs across countries, accounting regimes, and firms. The paper relies on a multi-disciplinary perspective and addresses legal, accounting, economic and strategic aspects of loan loss provisioning (LLP) and NPLs. A harmonised approach to NPL recognition is particularly desirable, in view of the fact that IFRS 9, the new accounting standard on loan loss provisioning, will be mandatory from January 2018. IFRS 9 changes the relationship between NPLs and provisions, by relying on greater judgement to determine provisions. The potential for divergence makes the need for comparable indicators against which to assess asset quality all the greater
Big Data and central banks
No full textThis commentary recaps a Centre for Central Banking Studies event held at the Bank of England on 2–3 July 2014. The article covers three main points. First, it situates the Centre for Central Banking Studies event within the context of the Bank’s Strategic Plan and initiatives. Second, it summarises and reflects on major themes from the event. Third, the article links central banks’ emerging interest in Big Data approaches with their broader uptake by other economic agents
Modelling metadata in central banks
No full textThis article discusses a small scale pilot to harmonise three Bank of England statistical and regulatory data forms. The primary purpose of the pilot was to assess opportunities for improved operational efficiency in regulatory reporting. The broader purpose was to demonstrate how common data standards can be created from heterogeneous data sets. In the course of discussing the pilot, the article explains the history of how data has been collected at the Bank of England; how that process is changing in light of the Bank’s Strategic Plan; and why a common data standard is a critical financial market infrastructure fundamental to the success of global regulatory reform
