Non-Performing Loans, Governance Indicators and Systemic Liquidity Risk: Evidence From Greece

Anastasiou, Dimitrios; Bragoudakis, Zacharias; Malandrakis, Ioannis

doi:10.2139/ssrn.3402414

Cited by 18 publications

(30 citation statements)

References 22 publications

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“…In the second stage, we consider the variables relevant for the institutional framework, for the government effectiveness and regulatory quality and also the prudential regulation. The results show that an improvement in the government effectiveness will contribute positively to the quality of loans, reducing the NPLs (similar to Anastasiou et al, 2019). On average, a 1% increase in government effectiveness leads to a decrease by 0.3% in the probability of higher NPLs.…”

Section: Determinants Of the Npl Ratio For The Private Sectormentioning

confidence: 61%

“…However, for the sample of countries included in this paper, such indicators are relevant considering that most of them ranked in top 15 lower values among EU countries. Anastasiou et al (2019) study the impact of an aggregate measure for governance on the NPL ratios for the Greek banking sector over 1996-2006. Ari et al (2019) use as a proxy for institutional strength the GDP per capita, anticipating that a strong institutional framework will work in two directions.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Control variables for the sale of loans are used and also prudential regulation is evaluated. The variables were selected based on the findings from the literature (Louzis et al, 2012;Beck, 2013;Jakubík & Reininger, 2014;Gosh, 2015;Anastasiou et al, 2019) and data availability. Some summary statistics are presented in Table 1 (Annex 1).…”

Section: Variables Affecting Non-performing Loansmentioning

confidence: 99%

See 2 more Smart Citations

Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective

Tatarici

Kubinschi

Barnea

2020

Management &Amp; Marketing. Challenges for the Knowledge Society

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This article investigates the determinants of non-performing loans for a panel of EEC countries and the implications for the real economy, covering the period 2005-2017. Among the determinants, the paper proposes macroeconomic factors, banking sector variables, and cost and governance indicators. Additionally, the paper explores the extensive use of macroprudential measures in these countries. Using a panel with fixed effects and a dynamic GMM estimator, the results support the existing findings that adverse macroeconomic developments are generally associated with higher non-performing loans, while increases in NPLs have a rather transitory effect on the real economy and credit. NPL ratios increase if macroeconomic conditions deteriorate, while an improvement in the government effectiveness reduces them. A more profitable and better capitalized banking sector generally leads to lower NPLs. Moreover, countries with higher past credit growth rates witnessed higher NPLs in the periods that followed. These results support the use of macroprudential measures for increasing the resilience of borrowers, such as limits on the indebtedness level (such as debt service-to-income, DSTI or loan-to-value, LTV caps), as tools to temper the credit cycle.

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Section: Determinants Of the Npl Ratio For The Private Sectormentioning

confidence: 61%

Section: Literature Reviewmentioning

confidence: 99%

Section: Variables Affecting Non-performing Loansmentioning

confidence: 99%

See 1 more Smart Citation

Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective

Tatarici

Kubinschi

Barnea

2020

Management &Amp; Marketing. Challenges for the Knowledge Society

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“…The unemployment rate was found to have a strong positive relationship with NPLs. Anastasiou et al (2019b) use a sample of yearly observations from 1996 to 2016 (covering both the pre-and post-crisis period). The variables used include the six Worldwide Governance Indicators (hereafter WGI), aggregate NPLs plus additional control variables for Greece.…”

Section: The Impacts Of Government Failures On Nplsmentioning

confidence: 99%

Government failures and non-performing loans in European countries: a spatial approach

Ofria

Mucciardi

2021

JES

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PurposeThe purpose is to analyze the spatially varying impacts of corruption and public debt as % of GDP (proxies of government failures) on non-performing loans (NPLs) in European countries; comparing two periods: one prior to the crisis of 2007 and another one after that. The authors first modeled the NPLs with an ordinary lest square (OLS) regression and found clear evidence of spatial instability in the distribution of the residuals. As a second step, the authors utilized the geographically weighted regression (GWR) to explore regional variations in the relationship between NPLs and the proxies of “Government failures”.Design/methodology/approachThe authors first modeled the NPL with an OLS regression and found clear evidence of spatial instability in the distribution of the residuals. As a second step, the author utilized the Geographically Weighted Regression (GWR) (Fotheringham et al., 2002) to explore regional variations in the relationship between NPLs and proxies of “Government failures” (corruption and public debt as % of GDP).FindingsThe results confirm that corruption and public debt as % of GDP, after the crisis of 2007, have affected significantly on NPLs of the EU countries and the following countries neighboring the EU: Switzerland, Iceland, Norway, Montenegro, and Turkey.Originality/valueIn a spatial prospective, unprecedented in the literature, this research focused on the impact of corruption and public debt as % of GDP on NPLs in European countries. The positive correlation, as expected, between public debt and NPLs highlights that fiscal problems in Eurozone countries have led to an important rise of problem loans. The impact of institutional corruption on NPLs reports that the higher the corruption, the higher is the level of NPLs.

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“…It is also stated that the effect of these variables decreases as the crisis deepens. Anastasiou, Bragoudakis & Malandrakis (2019) proposed to identify the determinants of NPLs by testing the effects of both governance and macroeconomic factors. They used the data for the period of 1996-2016.…”

Section: Literature Reviewmentioning

confidence: 99%

The Effect of Changes in Economic Growth on Non-Performing Loans (NPLs) Problem in the Greek Banking System

Şan¹,

Haderi²

2021

RJFA

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The Greek economy was affected very badly by the global economic and financial crisis of 2007-2008. The main reason of this catastrophic event is that the country's speedy economic and financial growth in the pre-crisis period heavily based on the foreign funds, and the flow of these funds stopped immediately -even turned to opposite direction-with the spread of the crisis to Europe. This negative happening as well as the rearrangement of the public debts and remarkable reduction in the bank deposits led to a big financial crisis, and thus economic recession. Meanwhile, the loan quality in the banking system worsened extremely -almost half of the credits turned to bad loan-due to the macroeconomic deterioration as well as the banks' very tolerated lending policies before the crisis, the borrowers' imperfect attitudes, and improper governance. The improvement in NPLs ratio, which started simultaneously with the modest economic recovery in 2017, decreased it to 30.2 percent in 2020 from its peak level of 48.5 percent in 2016. However, a big part of it has been achieved thanks to write-offs and loan-sales.In this study, it was aimed to measure the effect of the changes in economic growth on these drastic changes in NPLs ratio. Although the changes in the gross domestic product (GDP) and NPLs ratio have always been in consistency with the economic theory, except the pandemic year of 2020, the often big differences between their changing rates imply that some other factors have also played significant role on NPLs movements. The findings of some studies for Greece indicate to remarkable impact of both economic growth and the other factors on bad loans issue. The results of our regression analysis also show that the relation between economic growth and NPLs is not so strong.In spite of the noticeable improvement, NPLs ratio is still at a very high level and requires constant remarkable declines in order to come down to the generally accepted levels. To perform this and have economic and financial recovery at the same time, the recovery should not be achieved only by write-offs and portfolio sales, but by collections from borrowers, and executions. The banks and the government should make the necessary changes in their policies and applications so as to decrease NPLs ratio through new lending, compromise with proper borrowers, and court executions.

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Non-Performing Loans, Governance Indicators and Systemic Liquidity Risk: Evidence From Greece

Cited by 18 publications

References 22 publications

Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective

Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective

Government failures and non-performing loans in European countries: a spatial approach

The Effect of Changes in Economic Growth on Non-Performing Loans (NPLs) Problem in the Greek Banking System

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