Sustainable Visual Analysis for Bank Non-Performing Loans and Government Debt Distress

Jong-Min Kim,Yumin Liu,Li Liu

doi:10.3390/su12010131

Jong-Min Kim, Yumin Liu + Show 1 more

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https://doi.org/10.3390/su12010131

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Abstract

This article visualizes bank non-performing loans (NPLs) and government debt distress data integration and an outcome classification after the outbreak of European sovereign debt. Linear and functional principal component analysis (FPCA) and biclustering are used to show the clustering pattern of NPLs and government debt for 25 EU and BRICS countries (Brazil, Russia, India, China and South Africa) during the period of 2006 to 2017 through high-dimensional visualizations. The results demonstrate that the government debt markets of EU countries experienced a similar trend in terms of NPLs, with a similar size of NPLs across debt markets. Through visualization, we find that the government debt and NPLs of EU and BRICS countries increased drastically after the crisis, and crisis countries are contagious. However, the impact of the Greek debt crisis is lower for non-crisis countries, because the debt markets of these countries are decoupled from the Greek market. We also find that sovereign debtors in the EU countries have much closer fiscal linkages than BRICS countries. The level of crisis in the EU countries will be higher than that in the BRICS countries if crisis is driven by the common shocks of macroeconomic fundamentals.

Highlights

The recent global financial crisis of 2008 and the subsequent European debt crisis of 2009 have forced some members of countries and regions, especially of Eurozone countries, to increase public spending to support the development of their banking systems
It can be found that the first three principal components obtained by functional principal component analysis (FPCA) have a good dimensionality reduction effect, and the first three principal components contain more data information
We examined the visualization of non-performing loans (NPLs) and government-to-GDP ratio integration and an outcome classification in Eurozone and BRICS countries after the global financial crisis of 2008 and the subsequent European debt crisis of 2009

Summary

Introduction

The recent global financial crisis of 2008 and the subsequent European debt crisis of 2009 have forced some members of countries and regions, especially of Eurozone countries, to increase public spending to support the development of their banking systems. Fast-growing balance sheets and declining capital ratios have increased banking risks, resulting in larger-scale and more frequent public intervention after the financial crisis [1] These interventions have strained sovereign states and sometimes threatened their debt sustainability. The European sovereign debt crisis has forced some members of countries and regions, especially of Eurozone countries, to increase public spending to support their banks. Under such severe budgetary pressure, it is difficult for some countries to raise funds to finance increasing debt. The European sovereign debt crisis has raised concerns about the vulnerability of the debt market and the potential systemic risk of sovereign debt defaults in other European debt markets [3]

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