What drives bank coverage ratios? Evidence from Europe
JRC Working Papers in Economics and Finance 2019/14
We analyse micro and macro drivers of coverage ratios, as well as of their components, in a cross-country sample of European banks. Among the former, we find that credit risk variables, including forward-looking indicators, are the most relevant bank-specific factors explaining bank coverage ratios, together with the level of capitalization in high-NPL banks. Among the latter, coverage ratios increase with GDP growth, suggesting they behave countercyclically, more stringent macro-prudential policies, and deeper NPL secondary markets. Finally, we find evidence of peer imitation behaviour in banks with coverage ratios below the country average.
ALESSI Lucia;
BRUNO Brunella;
CARLETTI Elena;
NEUGEBAUER Katja;
2019-08-29
Publications Office of the European Union
JRC117524
978-92-76-19663-1 (online),
2467-2203 (online),
OP KJ-AE-20-007-EN-N (online),
https://publications.jrc.ec.europa.eu/repository/handle/JRC117524,
10.2760/14133 (online),
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