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Federal Reserve Bank of Richmond
Richmond Fed Economic Brief
Loan loss reserve accounting and bank behavior
Eliana Balla
Morgan J. Rose
Jessica Sackett Romero

The rules governing banks' loan loss provisioning and reserves require a trade-off between the goals of bank regulators, who emphasize safety and soundness, and the goals of accounting standard setters, who emphasize the transparency of financial statements. A strengthening of accounting priorities in the decade prior to the financial crisis was associated with a decrease in the level of loan loss reserves in the banking system.

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Eliana Balla & Morgan J. Rose & Jessica Sackett Romero, "Loan loss reserve accounting and bank behavior" , Federal Reserve Bank of Richmond, Richmond Fed Economic Brief, issue Mar, 2012.
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Keywords: Financial markets ; Financial institutions
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