Leading indicators of non-performing loans in Greece: the information content of macro-, micro- and bank-specific variables

Vouldis, Angelos T.; Louzis, Dimitrios P.

doi:10.1007/s00181-017-1247-0

Cited by 33 publications

(29 citation statements)

References 28 publications

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“…The higher the interest rate is, the higher the real value of borrower's debt and debt servicing is more expensive. Therefore, as in Vouldis and Louzis (2018), our model reports this variable to predict the delinquency rate of US bank loans.…”

Section: Data Setmentioning

confidence: 99%

Forecasting the macro determinants of bank credit quality: a non-linear perspective

Fallanca

Forgione

Otranto

2020

JRF

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Purpose This study aims to propose a non-linear model to describe the effect of macroeconomic shocks on delinquency rates of three kinds of bank loans. Indeed, a wealth of literature has recognized significant evidence of the linkage between macro conditions and credit vulnerability, perceiving the importance of the high amount of bad loans for economic stagnation and financial vulnerability. Design/methodology/approach Generally, this linkage was represented by linear relationships, but the strong dependence of bank loan default on the economic cycle, subject to changes in regime, could suggest non-linear models as more appropriate. Indeed, macroeconomic variables affect the performance of bank’s portfolio loan, but such a relationship is subject to changes disturbing the stability of parameters along the time. This study is an attempt to model three different kinds of bank loan defaults and to forecast them in the case of the USA, detecting non-linear and asymmetric behaviors by the adoption of a Markov-switching (MS) approach. Findings Comparing it with the classical linear model, the authors identify evidence for the presence of regimes and asymmetries, changing in correspondence of the recession periods during the span of 1987–2017. Research limitations/implications The data are at a quarterly frequency, and more observations and more extended research periods could ameliorate the MS technique. Practical implications The good forecasting performance of this model could be applied by authorities to fine-tune their policies and deal with different types of loans and to diversify strategies during the different economic trends. In addition, bank management can refer to the performance of macroeconomic conditions to predict the performance of their bad loans. Originality/value The authors show a clear outperformance of the MS model concerning the linear one.

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Section: Data Setmentioning

confidence: 99%

Forecasting the macro determinants of bank credit quality: a non-linear perspective

Fallanca

Forgione

Otranto

2020

JRF

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“…The increasing level of NPLs will first affect the commercial banks in the long run then it will affect the financial position of the economy in the country (Souza and Feij o, 2011). The increasing drift of NPLs will affect the banking efficiency resulting in banking crises (Vouldis and Louzis, 2018). The NPLs will block the interest revenue, reduce investment openings as well as develop liquidity crises in the financial system, which results in bankruptcy problem and weak economic system.…”

Section: Introductionmentioning

confidence: 99%

Determinants of non-performing loans in the banking sector in developing state

Khan

Siddique

Sarwar

2020

AJAR

113

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PurposeThe size of non-performing loans (NPLs) plays a key role in the stability of the banking sector of a country. The factors that explain the NPLs contain very important information for banks. Studies in this regard with respect to developing states such as Pakistan have received little attention. This study aimed to scrutinize the determinants of NPLs observing a case of the banking sector in Pakistan over the period from 2005 to 2017.Design/methodology/approachThe sample consists of the banking sector (i.e., commercial banks) listed in Pakistan Stock Exchange over the period of 2005–2017. The banking factors, including profitability, operating efficiency, capital adequacy and income diversification, were evaluated. The estimations were done by regression modeling using random and fixed effects through STATA software.FindingsResults show that the operating efficiency and profitability indicators have a negative association with NPLs but were statistically significant, while capital adequacy and income diversification have a negative association with NPLs but were statistically insignificant.Research limitations/implicationsThe present study has considered limited banking indicators as determinants of NPLs and was limited to a specific time period from 2005 to 2017.Originality/valueThe study is an attempt to investigate various banking factors that affect the NPLs with respect to developing economies such as Pakistan.

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“…The NPLs tend to hinder the interest revenue, reduce investment openings as well as develop liquidity crises in the financial system, this result in bankruptcy problem which leads to banking financial instability and a weak economic system [6].…”

Section: Statement Of the Problemmentioning

confidence: 99%

Non-performing Loans and Banks’ Financial Stability in Kenya; Evidence from Commercial Banks

Koskei

2020

AJEBA

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The size of non-performing loans plays a vital role in banking stability of any given economy. The paper investigates the resilience and stability of banks amidst the deteriorating quality of its assets since the last Global financial crisis. This study examined the effect of non-performing loans on banks financial stability in Kenya’s commercial banks using secondary data for the period January 2015 to December 2019. A multiple regression model was utilised in analysing the data. Non-performing loans as measured by non-performing ratio had a positive and statistically significant relationship with banks financial stability as measured by Z a-score. The results implied that non-performing loans in Kenya’s commercial banks affects the banks financial stability. Loans to deposit ratio results specified a positive and non-statistically insignificant relationship with banks financial stability. The results inferred that loan to deposit ratio do not affect the banks financial stability. Inflation rate results had a positive but statistically significant relationship with banks’ financial stability indicating that inflation rate affects banks’ financial stability. The results for loan growth had a negative but statistically significant relationship with banks financial stability. The study recommended implementation of measures that curb increase in non-performing loans as they threaten banking financial stability.

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Leading indicators of non-performing loans in Greece: the information content of macro-, micro- and bank-specific variables

Cited by 33 publications

References 28 publications

Forecasting the macro determinants of bank credit quality: a non-linear perspective

Forecasting the macro determinants of bank credit quality: a non-linear perspective

Determinants of non-performing loans in the banking sector in developing state

Non-performing Loans and Banks’ Financial Stability in Kenya; Evidence from Commercial Banks

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