Dynamic Provisioning: Cross-Country Comparison
|Country||Year of introduction||Forms of provisioning||Trigger of rule||Applicability||Form of provisioning|
|Uruguay||2001||(i) Individual provisioning; and (ii) dynamic provisioning, which reflects the difference between monthly statistical losses on loans and the realized loan loss in that month.||Depends on individual NPLs.||Depends on individual bank’s portfolio.||Cumulative funds gradually build over time.|
|Spain 1||2005||(i) The specific provision covers incurred losses individually identified in specific loans; and (ii) the general provision, to cover incurred losses, not yet individually identified, in homogeneous loan portfolios classified as normal and calculated using statistical procedures.||Depends on individual NPLs.||Depends on individual bank’s portfolio.||Cumulative funds gradually build over time.|
|Colombia||2007 2||(i) Individual provisioning depends on the characteristic of the borrower; (ii) countercylical provisioning reflects changes in borrower’s credit risk due to economic cycle; and (iii) generic provisioning of at least 1 percent of total loan portfolio.||Regulator decides, based on default probabilities, but has also some discretion. Recent revisions will make decision more rule based.||Systemic, but is moving to individual banks.||Cumulative funds gradually build over time.|
|Bolivia||2008||(i) Specific provisioning; (ii) generic provisioning; and (iii) coutercyclical provisioning, with rates ranging from 1.5 percent to 5.5 percent depending on the type of loan. During a contraction, banks can use these provisions to offset up to half of the additional specific provisions required.||Six consecutive months of deterioration in loan quality (provided that the dynamic provisioning has been phased in fully, and there is no objection by the regulator).||Loan quality is computed for individual banks. However, the regulator takes into account the macroeconomic and sectorial conditions to issue the “no objection” statement required to trigger the rule.||Cumulative funds gradually build over time.|
|Peru||2008||(i) Generic provision depends on credit; and (ii) procyclical rate, dependent on GDP growth.||GDP-based.||Systemic.||Procyclical provisioning is discrete, and only implemented once trigger set in place.|
From 2000–04, the provisioning system was slightly different (there were three types of provisions instead of the current two and there were also some differences in the value of the parameters provided by the central bank’s model).
Starting in April 2010 dynamic provision is bank-specific.