Determinants of Non-Performing Loans: The Case of Eurozone

By Vasiliki Makri, Athanasios Tsagkanos, A. Bellas. 2014

465 citations recorded by the source corpus.

The purpose of the present study is to identify the factors affecting the non-performing loans rate (NPL) of Eurozone’s banking systems for the period 2000-2008, just before the beginning of the recession. In our days, Eurozone is in the middle of an unprecedented financial crisis, calling into question the soundness of the banking systems of European countries. Looking at both macro-variables (e.g. annual percentage growth rate of gross domestic product, public debt as % of gross domestic product, unemployment) and micro-variables (e.g. loans to deposits ratio, return on assets, return on equity), we investigate which factors determine NPL on aggregate level. Overall, our findings reveal strong correlations between NPL and various macroeconomic (public debt, unemployment, annual percentage growth rate of gross domestic product) and bank-specific (capital adequacy ratio, rate of non-performing loans of the previous year and return on equity) factors.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/1e0ae10dd49d4fb9bd83947828211f510d3ff251

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In Finance

1. Laxmi Koju
2. Ram Koju
3. Shouyang Wang
4. Sean Geobey
5. Yujun Cui
6. Haiying Lin
7. O. Weber
8. Amit K. Ghosh

Citations in the corpus

• Banking-industry specific and regional economic determinants of non-performing loans: Evidence from US states (2015, background): “…reduce NPLs while a nation’s exchange rate, private credit-to-GDP and past NPLs to increase present period’s NPLs. Moving toward the euro area region, Makri et al. (2014) examine the role of both macroeconomic and bank-specific factors on NPLs in 14 countries in the Eurozone and find a strong…”
• Macroeconomic and Bank-Specific Determinants of Non-Performing Loans: Evidence from Nepalese Banking System (2018, methodology): “The implemented econometric model is similar to the model by Makri et al. (2014) and Dimitrios et al. (2016), which were used to determine the credit risk of the euro area countries.”
• The Impact of Green Lending on Credit Risk in China (2018, background): “The significant impact of credit quality [71], ROA [72], and inefficiency, as well as the size of a bank [73] suggests that the NPL ratio of Chinese banks is influenced by variables that also have an effect on the NPL ratio of banks outside of China.”