Study On The Pro-cyclicality Problem Of Dynamic Provision In China

Loan loss provision is an important means to resist risks for bank.The amount and method of Loan loss provision derectly affects the anti risk ability of individual banks and even the whole banking industry,and futher impact on the stability of the financial system.The subprime crisis showed to us that provision requirements under IAS(International Accounting Standards)in operation which was based on the incurred loss model was obviously pro-cyclicality is the main issue that financial supervision in Post Crisis Era should achieve.Recently,international financial supervision began to study the dynamic provision.Their results showed that dynamic provision could enhance bank's ability to buffer against risks and be used as the complementary tool.China Banking Regulatory Commission in July 2011 promulgated the "measures for the administration of commercial bank loan loss provision".Since then,China has clearly begun to implement a certain dynamic loan loss plan.Although China's dynamic provisioning has some "dynamic" features,it's not really a real dynamic provision and it can not solve the problem of credit cis-cycle.In view of this,the data of 21 commercial banks are taken as samples.This paper empirically tests whether the loan loss preparation exists in China before the implementation of dynamic provision in 2011 and after the implementation of dynamic provision in 2011.The results were all paramagnetic.Then,on the basis of the empirical results and combining with the national conditions of our country,this paper designs and simulates a dynamic model.Finally,this paper analyzes the reasons for the lack of dynamic allocation effect and gives some suggestions.