Determinants of bank loan loss provisions for consumer mortgage loans in Taiwan

Abstract

Financial Supervisory Commission of Taiwan in 2007 mandated the banks in Taiwan to disclosure the quality in mortgage loans According to the pro-cyclical hypothesis when the economy is in the periods of upturns the probability of default decreases and banks will provision less on consumer mortgage loans The empirical results of this study indicate that in the period from 2008Q2 to 2014Q4 loan loss provisions (LLPs) for consumer mortgage loans have no predictive power for the prices of real estate and economic conditions It suggests LLPs for consumer mortgage loans do not support the pro-cyclical hypothesis In this study the empirical results also find that LLPs for consumer mortgage loan is positively related to the levels of consumer mortgage loan and non-performing loan Finally reverse ratio defined as the ratio of loan loss reserves to loans has a negative impact on loan loss provisioning by bank managers

Date of Award	2015 Jun 8
Original language	English
Supervisor	Tse-Shih Wang (Supervisor)