Provision for loan loss

This study examines the effect of audit committee tenure on financial reporting quality of listed deposit money banks in Nigeria. The study uses panel data obtained from the Nigerian Stock Exchange factbooks and the financial statements of 14 listed deposit money banks over a period of 10 years (2007-2016). The study uses cross sectional and time series research design. Financial reporting quality was measured using the modified Jones (1991) model and changes in working capital model, while audit committee tenure was measured as the mean tenure of audit committee members. The data was analyzed using descriptive (mean, standard deviation, minimum and maximum) and inferential statistics (correlation and regression analysis). The study reveals that audit committee tenure has a negative and insignificant effect on financial reporting quality under the two models. The implication of these results is that the tenure of audit committee members is not important when considering the financia...

The major output from the external audit function, which is an attestation to assertions contained in a financial report, is largely relied upon by investors in taking financial and investment decisions. However, observers and users of financial statements have raised fundamental questions about investors' confidence in the reports and practice of auditors. The objective of this study was to examine the perceived level of confidence imposed by institutional investors on the work of external auditors in terms of decision usefulness of audit reports, and quality of information attested to by an independent auditor. A structured Likert format questionnaire was designed and distributed to all institutional investors in Lagos State. Findings from this study show a significant relationship between confidence and institutional investors' reliance on audit reports for investment decisions. Results from the analysis suggest that despite public opinion on dwindling quality of audit reports, institutional investors still rely on audit reports for financial decisions.

This research concentrates on the design and implementation of a loan repayment prediction system for NIRSAL Plc., a non-financial institution dedicated to de-risking agriculture and supporting agribusinesses through credit risk guarantees. The primary aim of this system is to enhance the accuracy of loan repayment predictions, thereby minimizing the risk of loan defaults and improving the overall efficiency of credit approval processes. The project employs advanced machine learning algorithms and data analytics to analyze historical data on loan applicants, providing a robust tool for NIRSAL Plc. to assess creditworthiness and predict repayment likelihood. The implementation includes developing an interactive web-based platform using Python and the Flask framework, which facilitates data input, visualization, and predictive analysis. The model training involved using various algorithms, including Random Forest Classifier, Decision Tree Classifier, and Xgboost, the result shows that Xgboost performs best for predict loan repayments. The performance of these models was evaluated based on their accuracy and other relevant metrics. Consequently, Xgboost was picked for the development of the prediction system. The confusion matrices and other evaluation tables indicate a high level of prediction accuracy, demonstrating the system's effectiveness in identifying high-risk borrowers. By identifying high-risk borrowers, the system aids in making informed lending decisions and optimizing resource allocation, ultimately reducing nonperforming loans and fostering financial inclusion within Nigeria's agricultural sector. Additionally, the system can provide targeted support to borrowers facing repayment challenges, thereby enhancing the overall performance-wise of financial institutions lending to the agricultural sector. Generally, this project contributes to the body of knowledge in financial technology and loan management, offering a scalable solution to enhance credit risk management practices in the agricultural value chain sector.

This study sought to examine the repercussions of the adoption of the International Financial Reporting Standard 9 (IFRS 9) on the performance of commercial banks in Tanzania, with a focused inquiry into CRDB Bank. The objectives of the research encompass evaluating the impacts of these regulatory changes on financial performance, assessing alterations brought by IFRS 9 in risk management strategies, and evaluating provisioning practices implemented by CRDB Bank in response to IFRS 9. Employing a methodical approach, the study utilizes both descriptive and trend analyses to dissect data sourced from questionnaires and an exhaustive review of CRDB Bank's annual reports spanning from 2014 to 2023. The research sample is composed of 10 respondents, strategically selected to offer clear insights into the subject matter. The findings of this study found the significant impacts of IFRS 9 adoption on CRDB Bank's operational landscape. Financial performance metrics exhibit discernible shifts, reflecting the intricate interplay between compliance with IFRS 9 guidelines and overarching business objectives. Moreover, the analysis underscores notable advancements in risk management practices, indicative of a proactive approach towards mitigating potential liabilities. Additionally, the study sheds light on the provisioning practices, underscoring CRDB Bank's adaptability in response to evolving regulatory mandates where the NPL keep on becoming efficient over years since adapting IFRS 9. In light of these findings, the study recommend for strategic reformation within CRDB
Bank's operational framework to optimize alignment with the requisites of IFRS 9. Recommendations include the augmentation of risk management frameworks to enhance resilience in the face of regulatory fluctuations. Furthermore, enhancing a culture of continuous learning and adaptation can bolster CRDB Bank's capacity to navigate the complexities of IFRS 9 while concurrently optimizing financial performance., By embracing these recommendations, CRDB Bank can position itself as a trailblazer in the Tanzanian banking sector, not only in adherence to global accounting standards but also in fostering a culture of innovation and resilience amidst regulatory transformations.

The main purpose of this study is to measure up to what extent the independent factors defined by capital adequacy ratio, non-performing loans ratio, cost-income ratio, liquidity ratio, and loans-todeposits ratio impact the financial performance of sixteen commercial banks operating in the United Arab Emirates using panel data for the period of 2013-2019. The secondary data was collected from banks and examined by applying standard descriptive statistics and the random effect model for hypothesis testing. It is concluded from the regression outcomes that non-performing loans ratio and cost-income ratio have a significant negative impact on commercial banks profitability in the United Arab Emirates, while capital adequacy ratio, liquidity ratio, and loans -to-deposits ratio all have a very weak positive relationship on the return on assets but they are not determinants of bank's profitability due to the insignificant statistical impact on it. It is therefore suggested that to enhance financial performance and minimize the risk of non-performing loans in the future, banks must watch very carefully the loans' performance and analyze thoroughly the clients' credit history and ability to pay back their debts prior to any approval of loan applications. Furthermore, banks should continuously improve their assets utilization, liquidity, and techniques of managing operating costs, improve the impact of capital adequacy, and the use of deposits for lending activities from a weak positive impact to a significant positive impact on their profitability. The researchers recommend that future studies on credit risk management influence on banks' financial performance should consider more independent variables and longer periods of study such as twenty or thirty years to have more accuracy and generalized results.

This study examined the effect of risk management committee attributes on earnings quality of listed deposit money banks in Nigeria. The study covered period of 13 years from 2010 to 2022 and descriptive research design was adopted. 10 banks out of 14 listed deposit money banks in Nigeria were selected as sample and the data were extracted from the financial reports of the sampled banks for the period of the study and analysed using descriptive statistics, correlation matrix and multiple regressions using GLS. This study adopted the Chang, Shen and Fang (2008) model for measuring earnings quality in the banking industry. In order to assess the validity of the data, fixed and random effects were utilised with Hausman specification test which recommended fixed effect as preferred tool of analysis. However, because of the problem of heteroskedasticity, panel corrected standard error was applied. The study documents that risk committee meeting has significant impact on earnings quality of listed deposit money banks in Nigeria. Furthermore, the study found that other explanatory variables (risk committee financial expertise, independence, size and gender diversity) have no significant influence on earnings quality of listed deposit money banks in Nigeria. The study therefore recommended that more emphasis should be placed on the risk committee meeting due to its significant role played in reducing the discretionary loan loss provision leading to improvement in earnings quality of listed deposit money banks in Nigeria. The study also recommended that regulators such as SEC and CBN should define and review the standard financial expertise, independence, size and gender diversity required of the risk management committee members of companies in Nigeria with a view to improving the earnings quality.

Tier 3 commercial banks in Kenya play a vital role in the country's economic growth by facilitating the supply of money and supporting economic ventures. However, these banks face significant challenges that affect their financial performance, with financial risk being a critical factor. Financial risk involves potential losses arising from inadequate revenue generation, operational failures, market volatility, or regulatory changes, and primarily manifests in credit, market, operational, and liquidity risks. The objective of the study was to assess the influence of financial risk on the financial performance of Tier 3 commercial banks in Kenya, with a focus on the moderating role of bank size. A cross-sectional survey research design was adopted, targeting branch managers, executive managers, finance managers, credit managers, and other key personnel from Tier 3 banks. Data collection involved questionnaires for primary data and a secondary data collection sheet for financial performance metrics, analyzed using descriptive and inferential statistics. The study found that financial risk negatively affects financial performance, highlighting the need for effective risk management strategies. To mitigate financial risks, Tier 3 banks should implement robust risk-rating systems, continuous monitoring frameworks, and leverage financial innovations such as advanced analytics and digital tools to enhance decision-making. Strengthened internal controls, balanced loan portfolios, and adherence to prudential guidelines were also recommended to improve financial performance. Additionally, the study emphasized the importance of bank size as a moderating factor, underscoring the need for strategies aligned with the scale of operations. Future research could explore sector-specific risks and the role of emerging financial technologies in risk management for more granular insights.

PurposeThis paper examines the correlation of economic policy uncertainty (EPU) with nonperforming loans and loan loss provisions for 22 major developed countries over the 2008–2017 period.Design/methodology/approachThe study used the Pearson correlation methodology to assess the correlation between EPU, bank nonperforming loans and loan loss provisions.FindingsThe findings reveal that EPU is negatively correlated with nonperforming loans and loan loss provisions in the banking sector of EU countries but not for non-EU countries. Also, EPU is negatively correlated with nonperforming loans in the banking sector of the most advanced economies – the G7 countries, while loan loss provisions are more responsive to changes in EPU than NPLs in EU countries.Practical implicationsThe implication of the findings is that the correlation of EPU with loan loss provisions and nonperforming loans is influenced by regional characteristics.Originality/valueThis study is the first to analyze the asso...

Purpose -This paper examines the correlation of economic policy uncertainty (EPU) with nonperforming loans and loan loss provisions for 22 major developed countries over the 2008-2017 period. Design/methodology/approach -The study used the Pearson correlation methodology to assess the correlation between EPU, bank nonperforming loans and loan loss provisions. Findings -The findings reveal that EPU is negatively correlated with nonperforming loans and loan loss provisions in the banking sector of EU countries but not for non-EU countries. Also, EPU is negatively correlated with nonperforming loans in the banking sector of the most advanced economiesthe G7 countries, while loan loss provisions are more responsive to changes in EPU than NPLs in EU countries. Practical implications -The implication of the findings is that the correlation of EPU with loan loss provisions and nonperforming loans is influenced by regional characteristics. Originality/value -This study is the first to analyze the association of EPU with bank nonperforming loans and loan loss provisions under regional classifications such as the EU, non-EU and the G7 countries. This study provides insights on how regional differences might explain the co-movement of EPU with bank nonperforming loans and loan loss provisions.

Tier 3 commercial banks in Kenya play a vital role in the country's economic growth by facilitating the supply of money and supporting economic ventures. However, these banks face significant challenges that affect their financial performance, with financial risk being a critical factor. Financial risk involves potential losses arising from inadequate revenue generation, operational failures, market volatility, or regulatory changes, and primarily manifests in credit, market, operational, and liquidity risks. The objective of the study was to assess the influence of financial risk on the financial performance of Tier 3 commercial banks in Kenya, with a focus on the moderating role of bank size. A cross-sectional survey research design was adopted, targeting branch managers, executive managers, finance managers, credit managers, and other key personnel from Tier 3 banks. Data collection involved questionnaires for primary data and a secondary data collection sheet for financial performance metrics, analyzed using descriptive and inferential statistics. The study found that financial risk negatively affects financial performance, highlighting the need for effective risk management strategies. To mitigate financial risks, Tier 3 banks should implement robust risk-rating systems, continuous monitoring frameworks, and leverage financial innovations such as advanced analytics and digital tools to enhance decision-making. Strengthened internal controls, balanced loan portfolios, and adherence to prudential guidelines were also recommended to improve financial performance. Additionally, the study emphasized the importance of bank size as a moderating factor, underscoring the need for strategies aligned with the scale of operations. Future research could explore sector-specific risks and the role of emerging financial technologies in risk management for more granular insights.

This study examines the relationship between board independence and financial performance in publicly traded companies, incorporating audit quality, firm leverage, and firm size as control variables. Using panel data from 153 listed firms spanning 2014 to 2023, this study employs a random effects model (REM) regression analysis to explore the effects of independent board members on financial performance metrics, specifically return on assets (ROA). Data were collected from annual reports and verified through third-party financial databases to ensure reliability. The findings reveal that board independence positively influences financial performance, with firms exhibiting higher proportions of independent directors achieving superior ROA values. Among the control variables, audit quality and firm size positively correlate with financial performance, while firm leverage shows a negative association. These results underscore the importance of independent oversight in enhancing shareholder value and mitigating agency conflicts. This study contributes to the literature by providing empirical evidence on the moderating effects of audit quality, leverage, and size on the board independence-performance nexus over a comprehensive 10-year period. The originality lies in its integration of these critical control variables and its focus on a long-term dataset from an emerging market context, offering insights for policymakers, corporate boards, and investors aiming to optimize governance structures.

This study assessed the effect of credit risk management on financial performance of listed commercial banks in Tanzania. The study adopted a cross-sectional research design. The study employed a simple random sampling strategy in selecting 98 respondents from three Commercial banks listed. Data were analyzed using both descriptive and inferential statistics. The study findings indicated that; It was established that the variation in Return On Equity can be explained by the independent variables (Risk monitoring, Risk control and report, Risk Analysis and evaluation, Risk Identification) by 85.5 per cent. The study also established that the variation in Return On Asset can be explained by the independent variables (Risk monitoring, Risk control and report, Risk Analysis and evaluation, Risk Identification) by 82.6 percent. There is strong and positive relationship among variables in the study (R=0.872). The study concluded that at NMB Bank Plc (NMB), CRDB Bank Plc, and Commercial Bank Plc (DCB), Risk Management had a significant effect on financial performance. This implies that risk management strategies had great contribution on financial performance in the selected listed Commercial Bank in Tanzania. The study recommends that the listed commercial banks should continue implementing proper risk management to guide their operations. Internal controls are key to the operations of the Commercial banks. To ensure effective controls, the banks' management specifically the senior audit manager, accountants should facilitate conduction of regular checks on the ability of the strategies in place for risk management in regards to efficient risk assessment. Therefore, the commercial banks should regularly check on their operations and the policies to deal with threats to examine whether these meets all the banks' requirements to safeguard the banks from losses. Prior to approving any loan applications, banks must do a thorough analysis of the clients' credit histories and repayment capacity in order to improve financial performance and reduce the risk of non-performing loans in the future.

Jel Sınıflandırması M41, G20. Özet Yoğun rekabetin bir sonucu olarak, bankalar farklı kredi ürünleri sunmaktadırlar. Ne yazık ki bu krediler sunulurken biçimleri ile özleri birbirinden farklı olabilmekte ve biçimlerine göre muhasebeleştirilmeleri mali tabloların çarpıtılmasına ve bu tabloları kullananların yanlış yönlendirilmelerine neden olmaktadır. Bankalar sıfır faizli kredi verirken bile yüksek ücret, komisyon, sigorta primi ve benzeri tahsilâtlar yapmak suretiyle, maliyetlerini karşıladıktan sonra belirli bir kar elde edebilmektedirler. Bu kredilerden elde ettikleri faiz ve komisyon gelirlerini birbirinin yerine raporlayarak faiz ve faiz dışı gelirlerini çarpıtabilmektedirler. Bu çalışma, eşit geri ödemeli banka kredilerinin tarafların mali tablolarında gerçeğe uygun olmayan şekilde raporlanmasının etkilerini ortaya koymayı ve Uluslararası Muhasebe Standartları/Uluslararası Finansal Raporlama Standartları ışığında çözüm önerileri sunmayı amaçlamaktadır.

Özet Kredi kartları kullanım amaçları açısından incelendikten sonra geçerli olan yasal düzenlemelere değinilmektedir. Türkiye'de kredi kartlarının sektörel büyüklüğü ve krizdeki yapısı incelenmiştir. Krizde yapılan düzenlemeler ile kartların tüketici üzerindeki yükü azaltılmıştır. Bankalar kredi kartı alacaklarını yapılandırırken onları çeşitli finansal araçlarla varlık şirketlerine devretmekte veya yurtdışından seküritizasyon kredileri ile kaynak sağlamaktadırlar. Anahtar Sözcükler: Finansal kriz dönemi, kredi kartı düzenlemeleri, kredi kartı alacakları, varlık şirketleri, seküritizasyon kredisi.

This paper empirically examine whether the way African banks use loan loss provisions to smooth earnings is influenced by capital market motivations and the type of auditor after controlling for nondiscretionary determinants of loan loss provisions and fluctuations in the business cycle. The findings support the income smoothing hypothesis and indicate that (i) African banks use loan loss provisions to smooth reported earnings; (ii) listed African banks use loan loss provisions to smooth earnings to a greater extent than non-listed African banks possibly for capital market reasons; (iii) income smoothing via loan loss provisions is not reduced among African banks with Big 4 auditor; and (iv) bank provisioning in Africa is procyclical with fluctuations in the business cycle. The findings have three implications. One, listed African banks smooth income because they are more visible to investors and investors do not view stock price fluctuation as a good signal. Securities market regulators in African countries should enforce strict disclosure rules that reduce earnings smoothing practices in order to improve the transparency of banks' reported earnings in the region. Two, the presence of Big 4 auditor did not improve the informativeness of loan loss provisions estimates among African banks. Three, the evidence for procyclical provisioning suggest the need for dynamic loan loss provisioning system in Africa.

Mestrado em Contabilidade, Fiscalidade e Finanças EmpresariaisEste trabalho tem como objetivo principal analisar o Impacto do Financiamento Externo no uso discricionário das Loan Loss Provisions (LLPs) para as práticas de Gestão de Resultado e de Capital nos bancos Africanos. Para a nossa análise foi usada uma amostra total de 678 bancos comerciais correspondentes a 26 países Africanos, num espaço temporal de 5 anos (2011-2015). Os nossos resultados não são estatisticamente significativos, pelo que não podemos concluir que o financiamento externo implica uma maior gestão de resultados. Apenas podemos concluir que o financiamento externo leva a uma maior gestão de capital. Estes resultados indicam que os gestores Africanos se centram mais em situações ligadas ao sector operacional, como a qualidade das carteiras de crédito e o problema da concentração de clientes que é muito presente neste mercado, do que propriamente em questões ligadas ao sector estratégico, como o posicionamento d...

The study examined the effect of earnings quality on financial behaviour of deposit money banks (DMBs) in Nigeria. The study used data extracted from the financial statements of listed DMBs in Nigeria for the period 2008 to 2017. The study also employed panel data multiple regression technique. The result found that earnings quality has a positive and significant effect on cash balance of deposit money banks. The study concluded that earnings quality have positive and significant effect on financial behaviour of deposit money banks. In line with the conclusion, the study recommended that the management of deposit money banks should deploy flexible approach in form of window service to enable them respond quickly to profit making opportunities. This will increase their profitability and discourage them from engaging in any form of opportunistic behaviour, manipulative accounting tendencies and tempering with the credibility of the financial statement.

Purpose The purpose of this paper is to examine the effects of bank ownership structure and ownership concentration on credit risk. Design/methodology/approach Using panel data on a sample of 88 Chinese commercial banks, with 826 observations over a period of 2003–2018, this study has applied system generalised method of moments regression to examine the impact of bank ownership structure and ownership concentration on credit risk. This study has used two measures of credit risk, which are non-performing loan ratio (NPLR) and loan loss provision ratio (LLPR). Findings The results show that ownership type (both government and private ownership) exerts a positive and significant impact on credit risk. Measuring ownership concentration using Herfindahl–Hirchmann Index, the results indicate that concentration of ownership in the hands of government has a negative and significant effect on credit risk, whereas private ownership concentration positively impacts credit risk. Overall, the f...

The objective of the study was to establish the effect of corporate governance practices on earnings management of companies listed at the Nairobi Security Exchange (NSE). The target population consisted of the 49 companies that had been continuously and actively trading at the NSE between January 2010 and December 2012. Secondary data was used covering the period 2010 to 2012 and analyzed using linear regression to test the effect of the independent variables on the dependent variable. The study found that earnings management is negatively related to ownership concentration, board size and board independence but positively related to board activity and CEO duality. The study recommended the need for effective corporate governance practices in listed companies in Kenya to contribute to reduced earnings management and avert possible collapse of listed companies in Kenya.

This study is aimed to identify the effect of credit risk management on profitability of commercial banks of Ethiopia over the period of 2008-2018 G.C. The study employed quantitative research approach with explanatory research design. The secondary data source was employed. The result of regression analysis was applied to investigate the effect of explanatory variables on the profitability. The findings of this study show that, capital adequacy, loan to deposit ratio and loan provision ratio have positive and statistically significant effect on profitability of selected commercial banks in Ethiopia. In opposite direction, non-performing loan, loan to total asset ratio and cost per loan have negative and statistically significant effect on profitability. The profitability measured through ROA was best explained by explanatory variables incorporated in the model. Hence, the researcher suggested that the profitability of commercial banks can be improved through improving credit risk m...

There are various types of housing loans owned by Bank X, they have a risk of nonperforming loans (NPL). For keeping the NPL ratio always good, bank have to do the process of analyzing the selection of good prospective borrowers. The aim of this study was to analyze the factors that affect the Non-performing loan of Bank X include demographics and macro-economy and to analyze the development of credit property at Bank X, period 2012 until 2016. The methods used are descriptive analysis and logistic regression, with secondary data from financial statements for five years from 2012 until 2016 in Bank X Indonesia branch Surabaya. The results showed that recent education of borrower has positive and significant effects on NPL with 0.031 for P value and 5.584 for odds ratio. Based on the results it is concluded that the recent education have a significant effect on the NPL because higher a person's education, the better the job will be obtained by the debtor, so that the impact on income will be higher and is expected to make the debtor can pay the loan smoothly.

This study sought to examine the effect of capital on the financial performance of commercial banks in Kenya. The specific objectives of the study were to determine the effects of core capital, subordinate capital and risk weighted capital on the financial performance of commercial banks in Kenya. The study adopted a descriptive research design. The target population was the listed commercial banks in Kenya as licensed by the Central Bank of Kenya as of 2014. The study was based on secondary data retrieved from the banks’ annual audited financial reports spanning 5 years between 2010 and 2014. The study was based on quantitative data. The study findings showed that the core capital to total risk weighted assets for the Tier I banks decreased from year 2010 to year 2014 while that of the Tier II banks decreased from year 2010 to year 2014. The findings also showed that the total capital to total risk weighted assets for the Tier I banks decreased from year 2010 to year 2014 while tha...

As a result of the recent financial crisis, several key institutions urged the IASB and the FASB to re-evaluate their models for loan loss accounting and use more forwardlooking information. In this paper, we discuss both the particularities of the new approach and the main differences between the two new models taking into account the tensions between prudential and accounting objectives in accounting for credit losses. We provide a theoretical discussion seeking rationales for the two different expected loss models in terms of addressing information asymmetries in the manager-lender relationship and differences in bank business models. The paper pays special attention to conservatism and earnings management and their interaction with the two loan loss models. While, both the FASB and IASB models are more conservative than the current approach, each portrays a different type of conservatism. We also identify new avenues for further research linked to conservatism and earnings management within the financial sector, where additional stakeholders, i.e. governments, show significant concerns regarding the economic impact of accounting information.

This paper examines the link between the external auditor and firm value in Nigeria, over the period, 2013-2022. A Generalized Method of Moments Regression Analysis with robust standard errors of firm value of 155 listed firms in Nigeria was used. The measure of firm value (Tobin's Q) was found to significantly and positively relate to audit quality and audit fee, accounting for 71.2% of the variations in firm value. The study is unique in incorporating auditors' characteristics and analyzing auditors' characteristics reforms in Nigeria, which progressed from no governance code to a compulsory regime (Nigerian Code of Corporate Governance, 2018). The findings suggest that the auditor's tenure and negative opinion are significantly related to firm value. Auditor's rotation was not found to be significant. The study is limited by the number of samples, specifically 155 listed companies. It is suggested that further research can increase the total observations by adding to the research period. Further research is expected to be able to add other auditors' characteristics that may influence the decisions made by them.

With the second wave of the Covid-19 pandemic in full swing, banks face a challenging environment. They will need to address disappointing results and adverse balance sheet restatements, the intensity of which depends on the evolution of the euro area economies. At the same time, vulnerable banks reinforce real economy deficiencies. The contribution of this paper is to provide a comparative assessment of the various policy responses to address a looming banking crisis. Such a crisis will fully materialize when non-performing assets drag down banks simultaneously, raising the specter of a fullblown systemic crisis. The policy responses available range from forbearance, recapitalization (with public or private resources), asset separation (bad banks, at national or EU level), to debt conversion schemes. We evaluate these responses according to a set of five criteria that define the efficacy of each. These responses are not mutually exclusive, in practice, as they have never been. They may also go hand in hand with other restructuring initiatives, including potential consolidation in the banking sector. Although we do not make a specific recommendation, we provide a framework for policymakers to guide them in their decision making. * SAFE Policy Letters represent the authors' personal opinion and do not necessarily reflect the views of the Leibniz Institute for Financial Research SAFE, or any other institution. We want to thank Johannes Kasinger for discussions and help in the writing process, and Carl-Georg Luft of the SAFE Policy Center Team for excellent research assistance.

How to cite this paper: Geretto, E., Polato, M., & Jones, L. (2021). Single Supervisory Mechanism and corporate finance: A DSCR based approach for AQR prudential provisioning. Risk Governance and Control: Financial Markets & Institutions, 11(2), 47–57. https://doi.org/10.22495/rgcv11i2p4 Copyright © 2021 The Authors This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0). https://creativecommons.org/licenses/

Loan loss provision is an important accounting accrual in the banking sector. There have been numerous debates about the determinants of loan loss provision in several contexts. This study extends the debate by investigating the determinants of bank loan loss provision in non-crisis
years for 28 countries from 2011 to 2018. The non-crisis years cover the periods after the global financial crisis and the periods before the COVID-19 pandemic while the countries consist of African, European, and Asian countries. Using the generalized linear model regression and the quantile
regression methodologies, the results show that institutional quality is a significant determinant of bank loan loss provision, indicating that the presence of strong institutions decreases the size of bank loan loss provision in non-crisis years. In the regional analyses, it was found that economic growth is a significant determinant of bank loan loss provisions in African and Asian countries. Loan loss provision is higher in times of economic prosperity in African and Asian countries. Bank overhead cost is a significant determinant of bank loan loss provisions in Asian countries. Meanwhile, bank loan loss provision determinants are insignificant in European countries.

This study investigates whether banking sector support for the realization of the SDGs affects bank loan loss provisions (LLPs). Using country-level data for 28 countries from 2011 to 2018 and using the panel fixed effect regression estimation method, it was found that banking sector support for achieving SDG7 and SDG10 leads to a significant decrease in bank loan loss provisions. Banks that support the realization of SDG6, and operate in countries that have strong institutions, experience a significant decrease in LLPs while banks that support the realization of SDG7, and operate in countries that have strong institutions, experience a significant increase in LLPs. The regional results are mixed. In the Asian region, banking sector support for achieving SDG13 decreases bank LLPs while banking sector support for achieving SDG8 and SDG10 increases bank LLPs. In the European region, banking sector support for achieving SDG3 decreases bank LLPs while banking sector support for achieving SDG4 and SDG6 increase bank LLPs. In the African region, banking sector support for achieving SDG6 increases bank LLPs.

The main aim of this paper is to examine the consequences of International (Accounting) Financial Reporting Standards / IFRS-IASB and deferred taxation for banks in Eurozone area. The analysis used data from Annual Reports of four systemic Greek banks, which control around 95 percent of the sector's assets and 90 percent of total deposits. The results suggests that increasing banks' losses may improve their capital adequacy. The paper is organized as follows: in the next section we briefly present interactions between IASB and BASEL aiming at preventing banking and accounting problems at international level during the last decades. This is followed by the comparative analysis of banking supervision accords and the presentation of International Accounting Standard 12: Income Taxes. The research methodology, the data sources used in the analysis and research results are presented and discussed in section four. Last section summarizes the conclusions and presents further opportunities for research.

The major output from the external audit function, which is an attestation to assertions contained in a financial report, is largely relied upon by investors in taking financial and investment decisions. However, observers and users of financial statements have raised fundamental questions about investors' confidence in the reports and practice of auditors. The objective of this study was to examine the perceived level of confidence imposed by institutional investors on the work of external auditors in terms of decision usefulness of audit reports, and quality of information attested to by an independent auditor. A structured Likert format questionnaire was designed and distributed to all institutional investors in Lagos State. Findings from this study show a significant relationship between confidence and institutional investors' reliance on audit reports for investment decisions. Results from the analysis suggest that despite public opinion on dwindling quality of audit reports, institutional investors still rely on audit reports for financial decisions.

Son yıllarda yaşanan ekonomik gelişmelere bağlı olarak Türk bankacılık sektöründe özellikle KOBİ ve ticari kredilerdeki sorunlu krediler hızla artmakta, bu durum hem reel sektör hem de bankacılık sektörünün büyüme ve istikrarını olumsuz etkilemektedir. Bu çalışmanın amacı, sorunlu kredi ile mücadelede en yaygın yöntemlerden biri olarak kullanılan yeniden yapılandırmaların, sorunlu kredileri azaltmada etkin bir mekanizma olup olmadığının araştırılmasıdır. Çalışmada sorunlu krediler ile yeniden yapılandırılan krediler ilişkisi, GSYİH, döviz kuru ve faiz oranı değişkenleri ile birlikte 2009:1-2020:3 dönemine ait üçer aylık veriler ile ADRL (Auto-Regresive Distributed Lag) Sınır Testi Yaklaşımı kullanılarak incelenmiştir. Sınır Testi sonuçlarına göre, incelenen değişkenler arasında uzun dönemli eş bütünleşme ilişkisinin varlığı tespit edilmiştir. Sorunlu krediler ile yeniden yapılandırılan krediler, döviz kuru ve faiz oranı arasında anlamlı ve pozitif; sorunlu krediler ile GSYİH arasında ise anlamlı ve negatif ilişki olduğu, sorunlu kredi ile mücadelede en yaygın yöntemlerden biri olarak kullanılan yeniden yapılandırmaların beklentilerin aksine uzun vadede sorunlu kredileri arttırdığı sonucuna ulaşılmıştır.

Son yıllarda yaşanan ekonomik gelişmelere bağlı olarak Türk bankacılık sektöründe özellikle KOBİ ve ticari kredilerdeki sorunlu krediler hızla artmakta, bu durum hem reel sektör hem de bankacılık sektörünün büyüme ve istikrarını olumsuz etkilemektedir. Bu çalışmanın amacı, sorunlu kredi ile mücadelede en yaygın yöntemlerden biri olarak kullanılan yeniden yapılandırmaların, sorunlu kredileri azaltmada etkin bir mekanizma olup olmadığının araştırılmasıdır. Çalışmada sorunlu krediler ile yeniden yapılandırılan krediler ilişkisi, GSYİH, döviz kuru ve faiz oranı değişkenleri ile birlikte 2009:1 – 2020:3 dönemine ait üçer aylık veriler ile ADRL (Auto-Regresive Distributed Lag) Sınır Testi Yaklaşımı kullanılarak incelenmiştir. Sınır Testi sonuçlarına göre, incelenen değişkenler arasında uzun dönemli eş bütünleşme ilişkisinin varlığı tespit edilmiştir. Sorunlu krediler ile yeniden yapılandırılan krediler, döviz kuru ve faiz oranı arasında anlamlı ve pozitif; sorunlu krediler ile GSYİH arası...

Asset 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 multidisciplinary 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.

Asset 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.

Bank lending is a major source of income for a bank. Compliance with higher Basel capital requirements (CAR) portends serious implication for distribution of loan portfolio across different sectors. The objective of the study is to examine African banks’ responses to higher CAR in terms of portfolio shift. The study used descriptive statistics and ANOVA for panel data of African commercial banks that have implemented Basel II or III CAR for the period 2000 and 2018. Based on the results of our analysis, implementation of higher Basel CAR by African banks revealed four key findings. Firstly, our results suggest that higher Basel CAR particularly Basel III reduced total loans for South African banks. Secondly, African banks engage in portfolio shift with higher Basel levels. Thirdly, higher Basel capital increased banks' capital ratios in Africa, but some banks are still characterized by low equity. Fourthly, African banks reduce lending to high risk-weighted loans such as real es...

Non-performing loans (NPLs) that turn into bad debt or dead loans are a problem for Italy's banking industry. To some extent, this is unavoidable. Previously, Italian banks have given the impression that their risk controls for loans are unsuccessful because the banks own a disproportionate amount of NPLs. These banks are now paying more attention to the management of these risks. (Vaidya, 2013). "Information Technology (IT) is a critical component in creating value in banking industries. It provides decision makers with an efficient means to report information about risk, profitability and precedent conditions for loan" (Huaiqing, Mylopoulus and Liao, 2002). The purpose of this work is, through a case study, to highlight the possibility of Information System (IS) to support a new integrated process of credit monitoring to prevent the impairment of asset quality, providing increasingly reliable data, availability on demand and real-time information, and facilitating the creation of the development of global knowledge and new reporting tools, as well as integration of areas of risk and business operating processes. The findings show that the system implemented in a small Italian bank provides enough information on credit monitoring activities to improve the quality of the loans held in portfolio.

Non-performing loans (NPLs) that turn into bad debt or dead loans are a problem for Italy's banking industry. To some extent, this is unavoidable. Previously, Italian banks have given the impression that their risk controls for loans are unsuccessful because the banks own a disproportionate amount of NPLs. These banks are now paying more attention to the management of these risks. (Vaidya, 2013). "Information Technology (IT) is a critical component in creating value in banking industries. It provides decision makers with an efficient means to report information about risk, profitability and precedent conditions for loan" (Huaiqing, Mylopoulus and Liao, 2002). The purpose of this work is, through a case study, to highlight the possibility of Information System (IS) to support a new integrated process of credit monitoring to prevent the impairment of asset quality, providing increasingly reliable data, availability on demand and real-time information, and facilitating the creation of the development of global knowledge and new reporting tools, as well as integration of areas of risk and business operating processes. The findings show that the system implemented in a small Italian bank provides enough information on credit monitoring activities to improve the quality of the loans held in portfolio.

With the second wave of the Covid-19 pandemic in full swing, banks face a challenging environment. They will need to address disappointing results and adverse balance sheet restatements, the intensity of which depends on the evolution of the euro area economies. At the same time, vulnerable banks reinforce real economy deficiencies. The contribution of this paper is to provide a comparative assessment of the various policy responses to address a looming banking crisis. Such a crisis will fully materialize when non-performing assets drag down banks simultaneously, raising the specter of a fullblown systemic crisis. The policy responses available range from forbearance, recapitalization (with public or private resources), asset separation (bad banks, at national or EU level), to debt conversion schemes. We evaluate these responses according to a set of five criteria that define the efficacy of each. These responses are not mutually exclusive, in practice, as they have never been. They may also go hand in hand with other restructuring initiatives, including potential consolidation in the banking sector. Although we do not make a specific recommendation, we provide a framework for policymakers to guide them in their decision making. * SAFE Policy Letters represent the authors' personal opinion and do not necessarily reflect the views of the Leibniz Institute for Financial Research SAFE, or any other institution. We want to thank Johannes Kasinger for discussions and help in the writing process, and Carl-Georg Luft of the SAFE Policy Center Team for excellent research assistance.

Bank lending is a major source of income for a bank. Compliance with higher Basel capital requirements (CAR) portends serious implication for distribution of loan portfolio across different sectors. The objective of the study is to examine African banks’ responses to higher CAR in terms of portfolio shift. The study used descriptive statistics and ANOVA for panel data of African commercial banks that have implemented Basel II or III CAR for the period 2000 and 2018. Based on the results of our analysis, implementation of higher Basel CAR by African banks revealed four key findings. Firstly, our results suggest that higher Basel CAR particularly Basel III reduced total loans for South African banks. Secondly, African banks engage in portfolio shift with higher Basel levels. Thirdly, higher Basel capital increased banks' capital ratios in Africa, but some banks are still characterized by low equity. Fourthly, African banks reduce lending to high risk-weighted loans such as real es...

Asset 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 multidisciplinary 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.

Asset 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.

The present study aimed to analyse the quality of the earnings reported by banks inserted in dynamic and less dynamic financial markets, associated with IAS 39 as measurement standard of financial instruments, from 2013 to 2017. The study consisted of the analysis discretionary accruals of banks operating in different markets, namely Mozambican and Portuguese. Discretionary accruals were estimated based on the modified Jones (1991) model. The study results indicate that there is evidence of discretionary behaviour in the reported earnings, and is high to the dynamic markets context. On account of the previous finding, the study has drawn the differences in the use of financial instruments. It was found out that Mozambican banks use few instruments; however, the difference is meaningless. A gross part of Financial Instruments Available-for-Sale and used by Mozambican banks are made up of treasure obligations, which may partly explain the reduced discretionary behaviour compared to Portuguese banks.

The aim of this study is to test whether financial risk disclosures required by IFRS 7 and Pillar 3 are value relevant for investors to support them in their investment decisions. The sample in the study consists of banks listed on the London, Paris, Frankfurt, Madrid, and Milan Stock Exchanges over an 8year period, from 2007 to 2014. Based on the aforementioned standards, we built financial risk disclosure indexes and distinguished different risk categories, qualitative and quantitative, as well as credit, liquidity, and market risk. Our analyses confirm that there is a positive association between bank value and several categories of established risk disclosures. Furthermore, it suggests that disclosure adds value to more traditional risk value measures. Besides, our results suggest that investors pay attention to the strength of the bank authority when using risk disclosures.

Objective-The purpose of this study is to examine the effects of audit firm characteristics on the financial reporting quality of listed consumer goods firms in Nigeria. Methodology/Technique-This was explained using the agency theory as the underpinning theory. Audit firm characteristics were measured by auditor opinion, independence, tenure, audit quality and audit rotation while financial reporting quality was measured by discretionary accrual (Kothari, 2005). Correlational research design was employed and purposive sampling technique was used to sample 12 out of 21 consumer goods firms listed on the Nigerian Exchange Group as at December 2020. Data collected covered 15 years (2006 to 2020). Findings-Multiple regression analysis results revealed that auditor opinion, audit tenure and audit rotation have positive significant effects on financial reporting quality. On the other hand, auditor independence and audit quality show insignificant effects. The study therefore, concludes that, auditors' opinion, tenure and rotation are the determinants of financial reporting quality among consumer goods firms in Nigeria. Novelty-The results are useful to corporate regulators, policy makers, shareholders, lenders, etc. Type of Paper: Empirical.

As a result of the recent financial crisis, several key institutions urged the IASB and the FASB to re-evaluate their models for loan loss accounting and use more forwardlooking information. In this paper, we discuss both the particularities of the new approach and the main differences between the two new models taking into account the tensions between prudential and accounting objectives in accounting for credit losses. We provide a theoretical discussion seeking rationales for the two different expected loss models in terms of addressing information asymmetries in the manager-lender relationship and differences in bank business models. The paper pays special attention to conservatism and earnings management and their interaction with the two loan loss models. While, both the FASB and IASB models are more conservative than the current approach, each portrays a different type of conservatism. We also identify new avenues for further research linked to conservatism and earnings management within the financial sector, where additional stakeholders, i.e. governments, show significant concerns regarding the economic impact of accounting information.

The IASB and the FASB have recently re-evaluated the current model underlying loan loss accounting (the 'incurred loss'). Taking into consideration the G20's advice on using more forward-looking information, they introduce a new approach (the 'expected loss' model). This paper reviews the academic literature to shed some light on the new expected loss models when applied to the financial industry. The accounting literature discussed in this study outlines both general theoretical findings and empirical evidence that help to infer the potential impact of the new models. Given the link between loan loss impairment and accounting conservatism as well as earnings management, we explore these concepts from both a theoretical and empirical perspective. Indeed, the discretion envisaged in the new models may provide a potential tool for increased earnings management than at present under the current guidelines. Both models are more conservative than the current approach, but given the differences in the type of conservatism that the two new models entail, conditional and unconditional, we argue that the two proposals will provide different types of information and in this way lead to distinct economic consequences. Additionally, institutional factors and firm characteristics will also have a major impact on the way the models are used. Moreover, we also suggest new avenues for further research in conservatism and earnings management in an industry, the financial sector, where additional stakeholders show significant concerns regarding the economic impact of accounting information

Corporate failures across the globe have become an issue of concern for stakeholders andregulators. Financial reporting scandals that occurred in oceanic bank, intercontinental bank andthe recent bank crises of Skye Bank in 2016 really motivated the need for this study. The studyexamines audit quality, governance mechanism and earnings management of listed deposit moneybanks in Nigeria for the period of eleven years from 2009-2019. The population of the study consistsof all the 14 listed deposit money banks in Nigeria as at 31st December, 2019. The study adoptedexpo-factor and correlation research designs, and multiple regression was employed as techniqueof data analysis. The findings of the study revealed that audit independence, managerial ownershipand board independent have significant negative impact on earnings management of quotedNigerian banks while auditor size and audit tenure have insignificant influence on earningsmanagement of listed deposit money banks in Nigeria. In li...