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Credit Losses in Australasian Banking
Abstract
We analyse determinants of bank credit losses in Australasia. Despite sizeable credit losses over the past two decades, ours is the first systematic study to do so. Analysis is based on a comprehensive dataset retrieved from original financial reports of 32 Australasian banks (1980-2005). Credit losses rise when the macro economy is weak. Asset markets, particularly the equity market, are also important. Larger banks provide more for credit losses while less efficient banks have greater asset quality problems. Strong loan growth translates into significantly higher credit losses with a lag of 2-4 years. Finally, the results show strong evidence of income smoothing activities by banks.
Citation
Hess, Kurt; Arthur Grimes and Mark Holmes. 2008. "Credit Losses in Australasian Banking", Working Paper 08/10, Department of Economics, University of Waikato.
Motu code: MYS0152
JEL codes: G20, G21