INTER-COUNTRY AND CROSS COUNTRY ANALYSIS FOR LOAN LOSS ALLOWANCE

Abstract

This paper analyses the determinants of banks’ loan loss allowances for samples of Pakistani, Indian and Bangladesh banks. The research contains the study of 16 banks from the above mentioned counties. The model includes fundamental (non-discretionary) determinants of the allowance such as non-performing loans, and discretionary determinants such as income before the loan loss provision. In the paper we have carried out a cross country analysis along with an inter-country bank’s analysis to see the factors that are sensitive to provisioning of loan losses as well as how much weight-age is given to these factors by each bank. The results suggest that the loan loss allowance is directly affected by the earnings, equity and net-charge offs. The limitations and further areas of research are mentioned below in the case study.