Are Philippine domestic commercial banks procyclical or anticyclical?: A study on bank credit risk management policy and the business cycle

In the light of recent financial crisis, we recognize the importance of determining Philippine domestic commercial banks provisioning behavior. While an overall prudent behavior would be indicative of good fundamentals for domestic commercial banks, an imprudent behavior would necessitate greater BS...

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Main Authors: Cheng, Andrea Therese, Cu, Darlene Cindy, Ong, Maria Beatrice, Ong, Rachel Marie
Format: text
Language:English
Published: Animo Repository 2009
Online Access:https://animorepository.dlsu.edu.ph/etd_honors/355
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Institution: De La Salle University
Language: English
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spelling oai:animorepository.dlsu.edu.ph:etd_honors-13542022-02-22T02:44:24Z Are Philippine domestic commercial banks procyclical or anticyclical?: A study on bank credit risk management policy and the business cycle Cheng, Andrea Therese Cu, Darlene Cindy Ong, Maria Beatrice Ong, Rachel Marie In the light of recent financial crisis, we recognize the importance of determining Philippine domestic commercial banks provisioning behavior. While an overall prudent behavior would be indicative of good fundamentals for domestic commercial banks, an imprudent behavior would necessitate greater BSP regulations in order to avoid liquidity problems. As such, we seek to identify the determinants of provisioning on both a macroeconomic and bank-specific scale. More specifically, we wish to determine banks provisioning response to the business cycle. An anticyclical provisioning means that banks have sufficient cover for periods of economic downturns. It also prevents second round worsening effects on the macroeconomy. Using both the panel data estimation and the Arellano-Bond dynamic panel methodology, we find that Philippine domestic commercial banks are anticyclical as provisioning increases in periods of favorable economic activity. Moreover, provisioning response to other macroeconomic and bank-specific determinants, such as interest rate spread and bank inefficiency, also indicates prudent risk management. Though imprudent in some aspects, Philippine domestic commercial banks are generally prudent in their credit risk management. 2009-01-01T08:00:00Z text https://animorepository.dlsu.edu.ph/etd_honors/355 Honors Theses English Animo Repository
institution De La Salle University
building De La Salle University Library
continent Asia
country Philippines
Philippines
content_provider De La Salle University Library
collection DLSU Institutional Repository
language English
description In the light of recent financial crisis, we recognize the importance of determining Philippine domestic commercial banks provisioning behavior. While an overall prudent behavior would be indicative of good fundamentals for domestic commercial banks, an imprudent behavior would necessitate greater BSP regulations in order to avoid liquidity problems. As such, we seek to identify the determinants of provisioning on both a macroeconomic and bank-specific scale. More specifically, we wish to determine banks provisioning response to the business cycle. An anticyclical provisioning means that banks have sufficient cover for periods of economic downturns. It also prevents second round worsening effects on the macroeconomy. Using both the panel data estimation and the Arellano-Bond dynamic panel methodology, we find that Philippine domestic commercial banks are anticyclical as provisioning increases in periods of favorable economic activity. Moreover, provisioning response to other macroeconomic and bank-specific determinants, such as interest rate spread and bank inefficiency, also indicates prudent risk management. Though imprudent in some aspects, Philippine domestic commercial banks are generally prudent in their credit risk management.
format text
author Cheng, Andrea Therese
Cu, Darlene Cindy
Ong, Maria Beatrice
Ong, Rachel Marie
spellingShingle Cheng, Andrea Therese
Cu, Darlene Cindy
Ong, Maria Beatrice
Ong, Rachel Marie
Are Philippine domestic commercial banks procyclical or anticyclical?: A study on bank credit risk management policy and the business cycle
author_facet Cheng, Andrea Therese
Cu, Darlene Cindy
Ong, Maria Beatrice
Ong, Rachel Marie
author_sort Cheng, Andrea Therese
title Are Philippine domestic commercial banks procyclical or anticyclical?: A study on bank credit risk management policy and the business cycle
title_short Are Philippine domestic commercial banks procyclical or anticyclical?: A study on bank credit risk management policy and the business cycle
title_full Are Philippine domestic commercial banks procyclical or anticyclical?: A study on bank credit risk management policy and the business cycle
title_fullStr Are Philippine domestic commercial banks procyclical or anticyclical?: A study on bank credit risk management policy and the business cycle
title_full_unstemmed Are Philippine domestic commercial banks procyclical or anticyclical?: A study on bank credit risk management policy and the business cycle
title_sort are philippine domestic commercial banks procyclical or anticyclical?: a study on bank credit risk management policy and the business cycle
publisher Animo Repository
publishDate 2009
url https://animorepository.dlsu.edu.ph/etd_honors/355
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