Non-Bank Financial Institutions and Banks’ Fire-Sale Vulnerabilities

Cetorelli, Nicola; Landoni, Mattia; Liu, Lu

doi:10.2139/ssrn.4384353

Cited by 1 publication

(1 citation statement)

References 16 publications

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“…Pascual et al 2023). Non-bank financial institutions (NBFIs) are highly interconnected with the global banking system and the real economy and hence can contribute to growing losses, which in turn can jeopardise the banking system and affect the whole economy (Cetorelli et al 2023;Choudhary et al 2023).…”

Section: Introductionmentioning

confidence: 99%

Determinants of Non-Performing Loans in a Small Island Economy of Fiji: Accounting for COVID-19, Bank-Type, and Globalisation

Chand,

Kumar,

Stauvermann

2023

JRFM

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An increase in non-performing loans and bad debts in the banking sector can make banks vulnerable to a loss of confidence among customers and other banks and a banking collapse. The recent pandemic (COVID-19) and the evolving globalisation can affect bank operations, although the effects may depend on the type of banks and other bank-specific factors. In this paper, we revisit the topic on the determinants of non-performing loans of banks in a small island economy of Fiji over the period 2000 to 2022. We apply a fixed-effect method and consider seven banks (five commercial banks and two non-bank financial institutions). In our estimations, we examine the effect of bank-specific factors and control for the social and economic globalisation, the GFC, the COVID-19 pandemic, and bank-type effects, as well as the effect of the interaction between the bank type and the pandemic, as key contributions of the study. Overall, our results are consistent in terms of the effects noted from the bank-specific factors. From the extended model estimations, we note that COVID-19 had a more adverse effect on loan losses than the GFC, and the interaction between the bank type and COVID-19 indicates that non-banks were highly vulnerable to loan losses, whereas commercial banks exhibited greater preparedness. Economic globalisation reduces bank losses, whereas social globalisation exacerbates NPLs.

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Section: Introductionmentioning

confidence: 99%