Management and Resolution Methods of Non-performing Loans: A Review of the Literature

Anastasiou, Dimitrios

doi:10.2139/ssrn.2825819

Cited by 5 publications

(3 citation statements)

References 21 publications

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“…In addition, the phenomenon of securitization is also often associated with the phenomenon of non-performing loans (NPLs). According to Liu (2006), securitization is adopted by banks to manage their non-performing loans in the most efficient way possible, while Anastasiou (2016) identifies securitization as one of the possible efficient strategies to treat impaired loans, specifying that it is the necessary support of the State in increasing the securitization process and the creation of specific SPVs. The analysis of Affinito and Tagliaferri (2010), on a sample of Italian banks during the period of 2000-2006, shows that the banks that are most likely to carry out a securitization transaction are the banks with higher percentage of non-performing loans.…”

Section: Literature Reviewmentioning

confidence: 99%

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Securitization of (bad) loans to Italian SMES: The role of the public guarantee

Bittucci

Marzioni

Murè

et al. 2021

Banks and Bank Systems

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This study investigates the main factors driving the evolution of the securitization of loans to Italian small and medium-sized enterprises (SMEs). The value of securitization increased in last two years, even though it has not been used as collateral for central banks. The disposal of non-performing loans (NPLs) may have been rather triggered by increasing attention of the international institutions to such an issue, within the general purpose of financial stability. The purpose of this paper is to interpret such a phenomenon focusing on Italian banks and restricting the analysis to the case of securitizations backed with loans to small and medium-sized enterprises (SMEs). The interesting result that emerges, supported by econometrically tested empirical evidence, is that given the orientation of international financial institutions, such as the ECB and the EBA, and reacting to incentives coming from the fiscal policy authorities for the public guarantee of loans, banks have been using securitization to reduce the burden on their bad balance sheets due to (NPLs). It was found that the public guarantee had a positive impact on SME securitization, whereas securitization in other sectors has not been affected significantly. Such evidence suggests that, in the absence of a public guarantee, the financial stability target would have been at risk, and the effectiveness of collateral-based policies in the recent past must be improved to enhance access to credit for SMEs.

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Section: Literature Reviewmentioning

confidence: 99%

“…http://dx.doi.org/10.21511/bbs.16(4).2021.16Figure A3. Dynamics of regressors Source: Authors' calculations based on data extracted from the European Datawarehouse Database.Figure A4.…”

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confidence: 99%

Securitization of (bad) loans to Italian SMES: The role of the public guarantee

Bittucci

Marzioni

Murè

et al. 2021

Banks and Bank Systems

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“…Investigating the causes of bank loan portfolio soundness is a critical challenge for regulatory authorities as a result of its effects on financial stability (Louzis et al, 2012;Baldini and Causi, 2020), no less than to bank management (Anastasiou, 2016). Non-performing loans (NPLs), namely, problematic loans outstanding for at least 90, are normally considered a valid proxy for the ex post bank credit risk and are believed to be a suitable early indicator of bank distress being a common feature of many banking crises (Kaminsky andReinhart, 1999, andrecently Ari et al, 2019).…”

Section: Introductionmentioning

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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