Empirical Evidence on Npls Resolution: Serbia and Cesee Countries

Abstract

In past decade, joint impact of financial crisis and economic recessions, followed by inadequate loan disbursement practices, influenced on high NPLs ratios existence in certain countries. Negative effects of high NPL ratios on economic growth and credit lending activity signalized the necessity of urgent reaction in the direction of NPLs declining at satisfactory pace. This paper analyzes movements and trends in NPLs stock as a consequence of successful resolution of NPLs issue in Serbia and selected CESEE countries. Simultaneously, the paper highlights benefits, which are derived from successful implementation of NPLs resolution strategy, as well as the significance of preventing NPLs accumulation in financial systems. Due to avoidance of future emergence of new NPLs in significant extent (which could seriously deteriorate the stability of banking systems), authors concluded that within observed countries has been created a positive economic environment and sufficient incentives for further credit lending activity growth in prospective period.

Measuring banking system resilience by using the Texas ratio

“…The previously mentioned approach seeks to create soundness in the capacity of the bank to "clean" the balance sheet and enable an entirely new lending cycle with a solid basis. This strategy could only be used if there is a common mindset, or agreement amongst all parties involved in actively removing the primary causes of the increase in NPLs throughout the preceding time frame (Mirković & Vujičić, 2018).…”

Measuring of banking system resilience by using the texas ratio

“…Above mentioned approach has the main goal impersonated in creation of soundness bank's capacities for balance sheet "cleaning" and making possible a new credit cycle based on healthy background. This approach could be realized only if there exists a uniform attitude, i.e., consensus between all stakeholders that make active participation in removal of main drivers for NPLs growth in previous period (Mirković & Vujičić, 2018).…”