## Figure 1.17. Underprovisioning in the Weak Tail of Banks

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**Canonical URL:** [Figure 1.17. Underprovisioning in the Weak Tail of Banks](https://www.imf.org/-/media/files/publications/gfsr/2017/april/chapter-1/figure1-17.pdf)

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### 1. Provision Expense-to-Gross Loan Ratio and Problem Loan Provision Coverage Ratio (Percent)
- Provisioning has risen but not fast enough, as banks strain to maintain coverage ratios.
- Provision expense: China (left scale).
- Provision expense: EM excluding China (left scale).
- Provision coverage ratio: total EM (right scale).

### 2. Percentage of Assets by the Ratio of Nonperforming and Problem Loans over Tier 1 Capital and Loan Loss Provisions, 2016
- As a result, there is a large weak tail of banks with a high ratio of bad loans to buffers.
- Percentage-of-system-assets categories (legend labels preserved):
  - Bad loans are 50%–70% of available buffers
  - Bad loans are 70%–90% of available buffers
  - Bad loans are > 90% of available buffers

### 3. Number of Years to Absorb Additional Provisions through Earnings, by Share of Assets (Percent)
- Provision needs exceed annual profits in 30 percent of emerging market banks outside China.
- Categories by years of earnings to absorb provisions (legend labels preserved):
  - > Three years of earnings
  - One to three years of earnings
  - < One year of earnings
- Representations based on earnings measures:
  - Based on Net Income
  - Based on Preprovision Profits
- Share of sample assets shown for:
  - Current
  - After raising provisions

### 4. Percentage of Assets with Tier 1 Ratio below 10 Percent (Percent)
- If provisions were deducted from equity, weak banks would jump up to 35 percent of assets.
- Country ordering and grouping as presented (panels and labels preserved):
  - Saudi Arabia, Colombia, Malaysia, United Arab Emirates, China, Turkey, Thailand, Mexico, Indonesia, Poland, Brazil, South Africa, EM excluding China, Russia, India
  - (Additional listings appear in figure ordering: Colombia, India, South Africa, Russia, China, EM excluding China, Brazil, Turkey, Poland, Indonesia, Mexico, Thailand, United Arab Emirates, Saudi Arabia, Malaysia)

*Sources: SNL Financial; and IMF staff calculations. Note: In panel 3, earnings are based on three-year averages. EM = emerging market. 1 Banks with losses are included in this category.*

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_Source: https://www.imf.org/-/media/files/publications/gfsr/2017/april/chapter-1/figure1-17.pdf_