Amount Of Non-performing Loans Research Articles

Impact of Institutional Environment on Banks’ Non-Performing Loans: Evidence from BRICS Countries

The drivers of non-performing loans (NPL) and the possible effects of the institutional and business environments on the credit risk exposure of banks in the panel of BRICS countries and segregated models are analyzed in this paper. The purpose of the study is to identify the relationship between banking, macroeconomic and institutional factors of non-performing loans of banks at the BRICS level for the period 1996–2020. The panel ARDL approach is used for this purpose. The Panel Granger causality test is applied to verify the hypothesis of the relationship between economic development and NPLs. Panel co-integration tests examine the existence of a long-term link between the same two variables. The results of the study demonstrated that a decrease in the proportion of NPLs results from boosting performance metrics like the Z-score. Because the banking industry has more resources as a result of higher financial development and/or financial intermediation, the amount of NPLs is reduced. Finally, our study demonstrates how important the institutional environment is for raising the quality of bank credit. It was concluded that the low level of NPLs in BRICS countries was largely linked to more effective anti-corruption management, robust regulatory standards, increased application of the rule of law, freedom of speech and accountability.

Mozambican commercial bank liquidity and its determinants

Despite the Central Bank of Mozambique's best efforts to assist commercial banks through a range of policies and regulations, the majority of these banks have been unable to satisfy their liquidity obligations on time, resulting in unacceptably large losses that have forced mergers or necessary resolutions. Thus, the purpose of this study was to determine the factors that affect Mozambican commercial banks' liquidity using bank-specific and macroeconomic data from 2013 to 2022. Data was analysed using unbalanced panel regression analysis (PRA). Specific bank data were gathered from a sample of eight commercial banks, which control 95 % of the market share in the banking system bank's annual report, which was accessible on their websites, while macroeconomic data were gathered from World Bank reports and Central Bank of Mozambique’s reports from 2013 to 2022 (10 years). Financial statements from the commercial banks were used for all statistical calculations for the years 2013 – 2022. The research findings show that bank liquidity was significantly and positively impacted by the GDP, inflation, loan interest rates, amount of non-performing loans, capital adequacy, and bank profitability. There was no statistically significant variation in bank size when it came to the decrease in liquidity. According to the report, Mozambican commercial banks should be more focused on deposit mobilization to preserve a healthy liquidity buffer and enhance liquidity performance. Therefore, by presenting results on the current liquidity position and the macroeconomic and bank-specific factors influencing the liquidity of commercial banks in Mozambique, this study hopes to add to the body of current literature. The research study suggests strengthening the fiscal and monetary policies to improve bank liquidity control and monitoring systems in compliance with Basel III regulations.

ТРАНСФОРМАЦІЯ ФІНАНСОВОГО УПРАВЛІННЯ В БАНКІВСЬКОМУ СЕКТОРІ УКРАЇНИ ПІД ЧАС ВІЙНИ

Introduction. None of the spheres of social life, including the economic, can take place according to established approaches and mechanisms. Banking is no exception, first of all, the development of the banking sector, in which ambitious goals that lead to the acceleration of its transformation processes are always prominent. A key issue in the functioning of the banking sector at any stage of its development is ensuring financial stability in the short term and financial stability in the long term. This issue became even more relevant during the COVID-19 pandemic, and gained importance with the full-scale invasion of the aggressor country on the territory of Ukraine. The purpose of the article is to define the features of effective financial management, and substantiate the main parameters of the banking institutions business processes organization in the conditions of military aggression Results. The article formulates the main goal and principles of effective financial management in banking sector, namely: transparency, variability, reflexivity, informativeness, hierarchy, adaptability and corporateness. It has been proven that integration and process approaches to management are used in banking to ensure its effective functioning,. The effectiveness of financial management in the banking sector of Ukraine during 2021-2022 was studied through the analysis and assessment of the changes dynamics in banks' financial results, the amount of deductions to reserves for the depreciation of bank assets, the amount of non-performing loans, and the capital standards of banks. The key decisions of effective financial management by the National Bank of Ukraine after the full-scale invasion of the Russian Federation are diagnosed. Conclusions. The main parameters for organizing the business processes of the vast majority of banking institutions for effective bank-client communication are proposed, in particular, the organization of remote access, ensuring a smooth process of customer service, work on minimizing losses, reassessing the state of the loan portfolio and finding out its level of deterioration, duplication of personnel functions and others. It has been proven that in modern conditions effective financial management in banking is transformed in view of modern challenges and should be situational, fast and economically justified.

Examination of the Relationship between Non- performing Loans and Macro-economic Variables in Banking Sector: The Case of Turkey (2003-2020)

Although loans are a profitable product for banks, they inherently contain an element of risk. The financial sector in terms of the fact that a loan transferred to the economy is not paid in due time and becomes problematic, firstly affecting the bank that made the loan and then other banks. On the other hand, it affects the real sector in terms of reducing the amount of loan to be transferred to the economy and increasing the cost of loan. In other words, the existence and control of non-performing loans is very important for the activities of both the banking sector and the real sector. In this study, the relations between the amount of non-performing loans, real effective exchange rate, inflation rate, economic growth and interest rates were analyzed by ARDL analysis method. It covers the periods from 2003; Q1 to 2020; Q4. As a result, it has been determined that other variables other than the inflation rate affect non-performing loans.

Nonperforming loans in Malaysia’s commercial banks: Does economic growth matters?

A loan is one of the primary sources of income earned by the banks and either directly or indirectly contributes to the country’s economic growth. Previous studies have shown that economic growth can affect the number of loans given and the changes in nonperforming loans in the banking sector. During the economic downturn, the amount of nonperforming loans tends to increase. Most borrowers were unable to settle down their loans because some businesses went insolvent and left the loans unpaid. Therefore, this paper investigates the impact of economic growth on non-performing loans in Malaysia. Seven commercial banks are selected to be used in the panel data regression, with the data spanning from 1995 to 2020. The result from the fixed-effect model indicates that the changes in economic growth are positively related to nonperforming loans. However, the impact of economic growth does not significantly influence the changes in nonperforming loans in Malaysian commercial banks. While findings also reveal that return on asset, financial crisis and unemployment rate has a significant relationship with the nonperforming loans, with the magnitude of variables being as expected.

АНАЛІЗ КРЕДИТНОЇ ПОЛІТИКИ БАНКІВСЬКОГО СЕКТОРУ УКРАЇНИ

The article is devoted to issues of the banking system of Ukraine. In modern conditions regarding the functioning and development of banking in the country, the creation of the credit policy of Ukraine occupies an important place. If the bank's credit policy is effective, then the banking risk is reduced and the bank's profit increases, even in crisis conditions of economic development. To assess credit policy, such categories as: credit portfolio, amount of non-performing loans and compliance with NBU regulations were analyzed. The dynamics of the entire amount of loans issued was studied, as well as the structure of the credit portfolio of the banking sector of Ukraine by type of borrower during 2018-2022 was analyzed. The causes of credit risk were analyzed, this stage is important, because it helps to identify ways to overcome threats to a specific institution or in general system, and also minimizes the likelihood of risks. In the course of the research, the issue of non-performing loans was considered, this is an integral category of the bank lending process. A low-quality loan portfolio is characterized by a high proportion of non- performing loans, which is negative and requires immediate reduction. Control of their value allows to prevent serious problems of the bank's financial condition, contributes to improving the stability of both a specific institution and the banking system in general. In addition, the amount of reserves for outstanding liabilities was analyzed, the amount of reserved funds characterizes the credit risk management process. When implementing credit activities, it is important to comply with the economic standards of the National Bank of Ukraine, which provide an opportunity to analyze the accepted credit risk from a different perspective. That is why the dynamics of these indicators during 2018-2022 were considered, where special attention was paid to the group of credit risk indicators.

Banking system stability: A prerequisite for financing the Sustainable Development Goals in Nigeria

The banking system, which has been the fulcrum of funding for Nigeria’s economy, is plagued by instability in the face of a growing amount of non-performing loans. This is examined in the current milieu of the need for funding the Sustainable Development Goals (SDGs). Using a number of proxies for SDGs 8 and 9, annual time series data covering 1992 to 2019 were used with variables such as GDP per capita, commercial banks’ loans to small-scale enterprises, banking system stability indicators and liquid assets to total assets of banks. The study utilized the Autoregressive Distributed Lag. Findings showed that banking system stability has a significant positive effect on funding the SDGs 8 and 9 beyond the five per cent level of significance within the study period. Non-performing loans remained negative throughout the study. The result suggests that banking stability would enhance funding of the SDGs, and banks would be stable if they finance the SDGs. The policy implication explains the importance of banks actively pursuing opportunities to build sustainable enterprises and developing strategies that will enable their core banking business to be more venture-driven rather than consumer-oriented. In conclusion, there is a need to completely eliminate or reduce the quantum of non-performing loans from the system and establish a regulatory framework that will facilitate its expected role of intermediation in the economy profitably and successfully. AcknowledgmentThe authors would like to appreciate Covenant University for financial support to publish this paper.

The Influence of Credit Interest Rate and Credit Risk on Market Performance

This study aims to analyze the effect of credit interest rates and credit risk on market performance. Non Performing Loans (NPL) reflect bank credit risk, where the higher the NPL level, the greater the credit risk borne by the financing party. Due to high NPLs, financing will be more careful (selective) in channeling credit. This is due to the potential for uncollectible credit. The high NPL will increase the risk premium, which will lead to higher loan interest rates. Credit interest rates that are too high will reduce public demand for credit. The high NPL also resulted in the emergence of larger reserves, so that in the end bank capital was also eroded. Thus, the amount of NPL is one of the obstacles to the channeling of financing credit. The research method used is quantitative research. The sampling technique used was purposive sampling. The study was conducted on finance companies with a research period of 2015-2018. The analytical method used is the multiple regression test using SPSS.22 analysis tools, namely with a descriptive test, a classic assumption test, a model suitability test, and a regression test. The results of credit interest rates have no significant effect on market performance, and credit risk has a significant effect on market performance. This shows the interest of inventors to invest in shares of companies whose non-performing loans are not high even though the interest rates on these companies increase.

Behavioral determinants of nonperforming loans in Bangladesh

PurposeOver the last ten years (2010–2019), the amount of nonperforming loans (NPLs) has been more than tripled in the banking industry of Bangladesh. Thus, this paper explores the behavioral dimensions, which contribute to the NPLs.Design/methodology/approachBy analyzing social, cultural, psychological, political, economic, internal control mechanism and law enforcement contexts of Bangladesh, this study identifies nepotism (NE), moral hazard (MH ), inadequate collateral (IC), poor credit assessment (CA), lack of proper monitoring (LPM), repayment flexibility (RF), business risk (BR) and lending interest rate (LIR) as the catalysts of raising NPLs. Next, a structured questionnaire survey has been performed in Bangladesh among bank officials who closely work in credit risk management, credit supervision, corporate finance and loan recovery department. Finally, partial least squares (PLS) path modeling, a variance-based technique of structural equation modeling, is used in this study as a statistical tool to analyze the data.FindingsThis study finds that moral hazard problem, lack of proper monitoring, inadequate collateral and nepotism have significant positive impact on the raising of NPLs. Unfortunately, this study does not find any statistical significance of poor credit assessment, business risk and repayment flexibility on the NPLs in Bangladesh. Finally, this study reveals that lending interest rate has significant positive impact on the NPLs. Hence, this study concludes that domestic lending interest rate is not lower enough, and so this double-digit interest rate affects negatively to loan repayment.Research limitations/implicationsThis study concludes that moral hazard problem of borrower, lack of board independence, lack of proper monitoring, form and extent of collateral, management lobbying, indecorous personal guarantee by management, dependent-independent directors and nepotism are extensively contributing for occurring NPLs in Bangladesh. These noninstitutionalized stimulators should adequately be scrutinized by regulatory bodies, policy makers and banks. Besides, LIR needs to be decreased in a convenient level for mitigating NPLs.Originality/valueThis study is the empirical evidence of behavioral dimensions related with the growth of NPLs in Bangladesh by taking direct response from knowledgeable bankers.

Bank business modeling and levels of non-performing loans:Perspectives of international risk factors in Ukraine

This article identifies five different banking business models using the k-means method and demonstrates how banks carried out the migration between defined clusters during the banking crisis. The article identifies and links the banks with the business model they are most exposed to in terms of risk of insolvency. The factors that influence the rate of non-performing loans are defined. Developed econometric models will allow banks with certain business models to improve their activity with non-performing loans. The article also analyzes how the amount of loans to related parties can be injected into the amount of non-performing loans.

Legislative support of the resumption of lending

The article is dedicated to the research of legal support of the resumption of lending. Based on a conducted systematic analysis of current legislation and special sources, it is argued that the presence of a significant amount in banks is a significant obstacle to the development and reduction of cost of lending in Ukraine are the presence of a significant amount of non-performing loans from banks that are caused by low solvency of the population, a high level of real (effective) interest rates on loans, a high credit risk, numerous conflicts of legislation, certain provisions of the tax legislation. The article emphasizes that the existence of problem loans requires banks to create significant reserves for their coverage, limiting the amount of funds directed to lending, and significantly increases the bank's credit risk (CR). The article contains such ways of settling non-performing loans as restructuring of problem debts and/or partial forgiveness (write-off) of the debt, sale of debt with a discount (below their nominal value), foreclosure collateral (including mortgage), appeal to court with claims for debt collection under loan agreements, initiation of bankruptcy of the debtor, etc. The author considers the main directions of activity on the resumption of lending and acts of active and promising legislation aimed at settlement of debts. Author has been analyzed such acts of Parliament as the law on financial restructuring, which is conducted without court trial through negotiations between the debtor and creditors on the restructuring of monetary obligations to them, the law on the creation and maintenance of the Credit Register, which will help to avoid issuing loans to people with a negative credit history in the future, the law on the resumption of lending which aimed at protecting the interests of the banking sector (creditors) from unconscientious borrowers, as a result of what most of the common loopholes for unscrupulous borrowers can be closed Also considered bills on settling arreas and debt management, the adoption of which will significantly reduce the level of the problem debt.

Corporate Debt Restructuring and Strategic Debt Restructuring: Defaulters’ Envy and Banker’s Pride

The world over, Non-Performing Loans (NPLs) have been a matter of concern for depositors, bank employees and management, governments and the public at large. The concept of restructuring and rescheduling loans has existed in India for several decades. Several steps have been taken by Reserve Bank of India (RBI) to reduce the amount of NPLs and one step is Corporate Debt Restructuring (CDR). During the last few years, there has been an extraordinary rise in cases referred and reworked under CDR. RBI has come out with Strategic Debt Restructuring (SDR) mechanism, through which banks have been empowered to recover their long outstanding dues from the restructured stressed companies. This research paper explains progress report of CDR cases and SDR mechanism. It also highlights the risk, challenges attached with the implementation of SDR package and concludes.

Banks’ Profitability and Financial Soundness Indicators: A Macro-level Investigation in Emerging Countries

Abstract The banking sector profitability has shrunk considerably after the setup of the global financial crisis, both in developed and emerging countries. The non-sustainable credit policies practiced by banks before the crisis have largely contributed to this distress. In particular in emerging markets, an easy access to credits has generated, after the financial turbulences, a considerable amount of non-performing loans which have subsequently affected the banks’ profitability. In addition, the need for an increased capitalization is also susceptible of negatively influencing the profitability in the short-run. Against this background, we test the influence of financial soundness indicators on the banks’ profitability, at the macro-level, in a set of emerging countries. Different from previous studies which assess the impact of the banking sector characteristics and of the macroeconomic context on the profitability, we focus on the internal conditions of banks. Using the IMF monthly data for the period 2005-2013 and a panel data approach, we discover that non-performing loans have a negative impact on banks’ profitability under the fixed effect model. While the level of liquidity has a mixed influence, the capitalization and the interest rate margins positively affect the banks’ profitability. As expected, the non-interest expenses negatively impact the profitability. The results prove robust either if we use the return on assets or the return on equity indicator to measure the level of profitability.

Estimating two-stage network Slacks-based inefficiency: An application to Bangladesh banking

This paper studies the performance of nineteen private commercial banks and two government-owned banks in Bangladesh during the period 2005–2008 using a slacks-based inefficiency measure and the directional technology distance function. Performance is measured assuming a black-box production structure and then the black-box is opened and examined using a two stage network production structure. Current period performance in maximizing desirable loans and securities investments and minimizing bad loans depends on how efficiently inputs at one stage of production are transformed into intermediate outputs which are used at a subsequent stage of production. In addition, current period production of the intermediate output is constrained by the amount of non-performing loans that were generated in an earlier period.

Stock Return Comovement and Systemic Risk in the Turkish Banking System

This paper investigates the evolution of systemic risk in the Turkish banking sector over the past two decades using comovement of banks’ stock returns as a systemic risk indicator. In addition, we explore possible determinants of systemic risk, the knowledge of which can be a useful input into effective macroprudential policymaking. Results show that the correlations between bank stock returns almost doubled in 2000s in comparison to 1990s. The correlations decreased somewhat after 2002 and increased again as a result of the 2007-2009 financial crisis. Main determinants of systemic risk appear to be the market share of bank pairs, the amount of non-performing loans, herding behavior of banks, and volatilities of macro variables including the exchange rate, U.S. T-bills, EMBI, VIX, and MSCI emerging markets index.

A ‘bank rent’ approach to understanding the development of the banking system in Bangladesh

This paper applies the ‘bank rent’ approach to understanding the development of the banking system in Bangladesh since its independence. The paper uses the financial restraint model as an analytical framework and argues that there still remains room for creating bank rents in order to change the current dreary performance of the banking system. The paper unearths a varied level of high nominal lending rates, high nominal spreads and too low or negative real spreads as per different clusters of banks both in the pre-liberalized and liberalized regime, and concludes that this persistent varied performance is largely the outcome of a high amount of non-performing loans, inefficiencies in managing credit risks, and fragmentation and distorted competition in the banking system. This varied level of performance of the banking clusters also results from the government's intervention in the activities of nationalized commercial banks and specialized banks for mediating credits to priority sectors at a subsidized rate. The paper suggests that a more coordinated use of monetary and fiscal policies is required with a view to creating appropriate rents for banks for redressing their current dismal performance.

Cost Structure and Efficiency of the Credit Departments of the Farmers' Associations in Taiwan

This study addresses the cost structure and operational efficiency of the credit departments of the farmers' associations in Taiwan, adopting both stochastic cost frontier analysis and data envelopment analysis. The factors that influence operational efficiency are also examined. In particular, problems of loan quality are considered to account for the considerable amount of non-performing loans. The results of this study indicate that economies of scale exist. However, the credit departments of the farmers' associations do not benefit from economies of scope. Non-performing loans are associated with a cost increase of approximately 17.6%. Regression analysis verifies that the non-performing loan ratio significantly and negatively influences all indicators of efficiency and that the 1997 Asian financial crisis also has a negative impact on efficiencies.

Effect of individual patterns of interest on transformational play of young children

The banking sector profitability has shrunk considerably after the setup of the global financial crisis, both in developed and emerging countries. The non-sustainable credit policies practiced by banks before the crisis have largely contributed to this distress. In particular in emerging markets, an easy access to credits has generated, after the financial turbulences, a considerable amount of non-performing loans which have subsequently affected the banks’ profitability. In addition, the need for an increased capitalization is also susceptible of negatively influencing the profitability in the short-run. Against this background, we test the influence of financial soundness indicators on the banks’ profitability, at the macro-level, in a set of emerging countries. Different from previous studies which assess the impact of the banking sector characteristics and of the macroeconomic context on the profitability, we focus on the internal conditions of banks. Using the IMF monthly data for the period 2005-2013 and a panel data approach, we discover that non-performing loans have a negative impact on banks’ profitability under the fixed effect model. While the level of liquidity has a mixed influence, the capitalization and the interest rate margins positively affect the banks’ profitability. As expected, the non-interest expenses negatively impact the profitability. The results prove robust either if we use the return on assets or the return on equity indicator to measure the level of profitability.