No abstract

The objectives of this study are, first, to examine the causes of nonperforming loans (NPLs) in the euro area for the period 2003Q1 to 2016Q1 and, second, to investigate if there is fragmentation between core and periphery banking markets. By employing both fully modified ordinary least squares (FMOLS) and Bayesian panel‐cointegration vector autoregression techniques, we estimate the long‐run effects of both bank‐specific and macroeconomic factors on NPLs. We find that NPLs in the euro area have performed an upward (much higher in the periphery) shift after 2008 and are mostly related to worsening macroeconomic conditions. A chi‐square test comparing the estimated coefficients for the core and periphery NPLs rejects the hypothesis of equality revealing another aspect of financial fragmentation in the euro area that leaves the periphery more vulnerable. Such findings can be helpful when designing macroprudential as well as NPL resolution policies.

In this study we propose a new determinant of non-performing loans for the case of the Greek banking sector. We employ aggregate yearly data for the period 1996-2016 and we conduct a Principal Component Analysis for all the Worldwide Governance Indicators (WGI) for Greece, aiming to isolate the common component and thus to create the GOVERNANCE indicator. We find that the GOVERNANCE indicator is a significant determinant of Greek banks' non-performing loans indicating that both political and governance factors impact on the level of the Greek non-performing loans. An additional variable that also has a statistically significant impact on the level of Greek non-performing loans, when combined with WGI in the dynamic specification of our model, is systemic liquidity risk. Our results could be of interest to policy makers and regulators as a macro prudential policy tool.

The objective of this study is to examine the causes of non-performing loans (NPLs) in the banking system of the euro area for the period 2003-2013 and distinguish between core and periphery country determinants. The increase in NPLs post crisis has put into question the robustness of many European banks and the stability of the whole sector. It still remains a serious challenge, especially in peripheral countries which are hardest hit by the financial crisis. By employing both Fully Modified OLS and Panel Cointegrated VAR we estimate that NPLs are affected by the same macroeconomic and bank-specific conditions but the responses are stronger in the periphery. Following the FMOLS estimations NPLs in the euro area have performed an upward (much higher in the periphery) shift after 2008 and are mostly related to worsening macroeconomic conditions especially with respect to unemployment, growth and taxes. Fiscal consolidation and interest rate margins are significant for the periphery while credit to GDP is significant only for the core. Quality of management and loans to deposits play an important role, while size is negatively significant only in the periphery. Most of these findings were confirmed by the panel Cointegrated VAR results. A chi-square test comparing the estimated coefficients for the core and periphery NPLs rejects the hypothesis of equality revealing another aspect of banking fragmentation in the euro area. Such findings can be helpful when designing macro-prudential as well as NPL resolution policies, which should be adjusted appropriately to the different responses between core and periphery banks.

No abstract

No abstract

No abstract

We employ quarterly credit standards data from the Bank Lending Survey, covering 14 EU countries for the period 2003 Q1 to 2016 Q1. By linking consecutive surveys and utilizing loan officers' responses regarding actual and expected credit standards, we set out to investigate which expectations formation mechanism best describes loan officers' expectations. According to our findings, bank loan officers' expectations are compatible with the adaptive expectations mechanism.