This paper finds that banking firms’ unexpected loan loss provisions had a significant effect of increasing bank opacity, both before and during the 2007-09 financial crisis. Furthermore, during the financial crisis, the extent to which banks delayed loan loss recognition is found to have had a significant effect on bank opacity, confirming an important concern raised by the Financial Crisis Advisory Group. Overall, banks’ practices in managing reserves seem to have a material impact on their opacity.
Article Citation
Iannotta, Giuliano, and Simon H. Kwan. 2013. “The Impact of Reserves Practices on Bank Opacity,” Federal Reserve Bank of San Francisco Working Paper 2013-35. Available at https://doi.org/10.24148/wp2013-35
About the Author
Simon Kwan is a senior research advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Simon Kwan