Bank Loan Loss Provision Determinants in Non-Crisis Years: Evidence from African, European, and Asian Countries

Loan loss provision is an important accounting accrual in the banking sector. There have been numerous debates about the determinants of loan loss provision in several contexts. This study extends the debate by investigating the determinants of bank loan loss provision in non-crisis years for 28 countries from 2011 to 2018. The non-crisis years cover the periods after the global financial crisis and the periods before the COVID-19 pandemic while the countries consist of African, European, and Asian countries. Using the generalized linear model regression and the quantile regression methodologies, the results show that institutional quality is a significant determinant of bank loan loss provision, indicating that the presence of strong institutions decreases the size of bank loan loss provision in non-crisis years. In the regional analyses, it was found that economic growth is a significant determinant of bank loan loss provisions in African and Asian countries. Loan loss provision is higher in times of economic prosperity in African and Asian countries. Bank overhead cost is a significant determinant of bank loan loss provisions in Asian countries. Meanwhile, bank loan loss provision determinants are insignificant in European countries.