Does Loan Loss Reserve of US Commercial Banks Contain Information for Future Level of NPL?

Abstract

Since the financial crisis in 2008 in America commercial banks attach great importance to NPL and LLR However the balance of capital requirements and LLR is more difficult to maintain for banks after New Basel Accord regulated Our study suggests that small banks have to earning-smooth to meet both conditions The main purpose for our study is the interrelation between LLR and NPL Due to LLR is a discretionary term which can decide by banks we suggest that NPL is a significant determinant when recording LLR Similarly although NPL is a non-discretionary term we find that LLR have a positive impact on it Implicating LLR contains extra information for NPL which is helpful for banks to evaluate the credit risk precisely

Date of Award	2014 Jul 26
Original language	English
Supervisor	Tse-Shih Wang (Supervisor)