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The provisioning experience of the major UK banks: a small panel investigation

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  • Darren Pain

Abstract

Using panel regression analysis, the factors that may help to explain increases in loan-loss provisions for the major UK banks are investigated. Explanatory variables reviewed include aggregate variables such as GDP growth as well as bank-specific factors such as the composition of the loan portfolio. The main findings are that a number of macroeconomic variables can indeed inform about banks' provisions, in particular real GDP growth, real interest rates and lagged aggregate lending growth. Bank-specific behaviour is also important - increased lending to riskier sectors, such as commercial property companies, has generally been associated with higher provisions.

Suggested Citation

  • Darren Pain, 2003. "The provisioning experience of the major UK banks: a small panel investigation," Bank of England working papers 177, Bank of England.
    • Handle: RePEc:boe:boeewp:177
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    File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/2003/wp177.pdf
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