| As the first barrier of banks resisting risk, the design and implementation of loan loss provision impact the individual bank’s ability to resist risk, and further affect the entire banking industry and even the security and stability of the financial system. The financial crisis in 2008 made banking regulators realizing that provisioning based on the Incurred Loss Model can exacerbate bank credit pro-cyclicality. Otherwise, dynamic provisioning which has inverse cycle and forward-looking features can reduce it and thus be praised highly by the international community. However, dynamic provisioning system till faces with many difficulties, such as the international accounting standards conflict, profit manipulation, tax issues and so on.With the requirements of commercial banks’risk management, the international accounting standards and supervision system, loan loss provision system in our country has experienced from incurred loss, fixed proportion in the provision to the current provision according to expected losses, dynamic adjustment of standard. The way of provisioning has been increasingly scientific and flexible and the provisioning system has been more mature and perfect. Although the current loan loss provision system of our country has the characteristics of "dynamic", but it is not the true sense of the dynamic provision system and also has many issues, such as provision pro-cyclicality, the motive of profit manipulation, weak supervision coordination, conflicts with current accounting standards, weak data base and lack of incentive compatibility mechanism and so on.At the same time, we select 16 domestically listed commercial Banks’data as samples, establishing a dynamic panel econometric model and using the difference of generalized moment estimation method (Diff-GMM) to estimate the model parameters, to analyses empirically whether our country commercial banks has pro-cyclical loan loss provision and whether bankers have used provisions to manipulate profit. We found that our country commercial bank loan loss provision has obvious pro-cyclicality, lacking of forward-looking and counter-cyclical features, and under the current provision system, commercial Bankers may use loan loss provisions for profit manipulation.For this reason, considering based on "the model of total credit", we further optimize a model of dynamic loan loss provision by introducing respectively adjustment coefficients of macroeconomic cycle history information and individual bank’risk characteristics. In theory, this model has a certain counter-cyclical and forward-looking features and can solve the pro-cyclical and incentive compatibility problems better. At the same time, complete dynamic loan loss provision system also needs to match the relevant policies and measures. The authorities should resolve the conflict of accounting standards, unify provision for regulatory requirements, implement differentiated regulation to avoid adverse incentives, strengthen commercial bank history data collection and improve the commercial bank information disclosure mechanism. |
