After analyzing the different reasons why the financial system and also the regulatory framework induced procyclicality, this paper reviews the experiences of three countries which have introduced dynamic provisioning as a regulatory tool to limit procyclicality. The case of Spainthe country with the longest experienceis reviewed, as well as those of Colombia and Perucountries that have recently adopted dynamic provisioning. A number of policy lessons are drawn from that comparison.
Dynamic Provisioning: Some Lessons from Existing Experiences
ADBI Working Paper Series