Non-performing Loans Of Commercial Banks Research Articles

Impact of Corporate Governance on Non-Performing Loans of Commercial Banks in Bangladesh

The paperinvestigates the nexus between corporate governance and the levels of non-performing loans (NPL) of commercial banks in Bangladesh based on the sample of 10 private commercial banks for 10 years covering from 2012 to 2021. A number of econometric models such as pooled OLS, fixed effect, random effect, cross-sectional GLS, and one- step system GMM approach were employed in our analyses. From the observed estimated coefficients, the availing of credit rating from the three renowned credit rating agencies had a significant negative impact on non-performing loans under pooled OLS, GLS, and random effect. Board size had a significant negative relationship under GLS while bank size had a significant positive influence. Institutional ownership had a significant negative influence and government ownership had a significant positive influence under the fixed effect model. From the estimated coefficients observed from the one-step system GMM, only director’s ownership is significantly lessening non-performing loans, while board meetings and stock-exchange listed banks had a significant positive impact. All other coefficient values under the one- step GMM estimation except for government ownership and employment of big four affiliated auditors as external auditor was found to adhere to our hypothesized impact.

Yếu tố tác động đến tỷ lệ nợ xấu của nhóm ngân hàng thương mại có cổ phiếu giao dịch trên sàn chứng khoán Việt Nam

This study explores micro and macro factors affecting the NPL ratio of Vietnamese commercial banks in 2015- 2022, including the period negatively affected by the COVID-19 pandemic. The research data was collected from 25 commercial banks whose shares were traded on all three stock exchanges in Vietnam. This dataset helps readers have a more comprehensive view of the factors affecting non performing loan ratio of the group of banks, with total assets accounting for nearly 80% of the total assets of 32 commercial banks operating in Vietnam. Based on the development and testing of a linear regression model, the study has contributed to demonstrating the positive impact of marginal interest income ratio, credit risk provision on lousy debt ratio, and the negative impact of return on equity and credit growth rates on non-performing loans of commercial banks studied in the period 2015- 2022

The Impact of Macroeconomic Factors on Non-Performing Loans of Commercial Banks: An Empirical Study Based on 2022 Provincial-level Data in China

The level of macroeconomic development varies, resulting in different non-performing loan ratios for commercial banks. Based on the relevant data of macroeconomic indicators from 31 provinces and cities in China in 2022, this paper empirically studies the relationship between regional gross domestic product (GDP), average urban employment salaries, the proportion of the tertiary industry, per capita consumer expenditure, the number of recipients of unemployment insurance, and the number of recipients of old-age insurance, and the non-performing loan ratio using a multiple regression model. A general model is established and tested to determine the final model. The empirical research results indicate that the proportion of the tertiary industry and the number of recipients of unemployment insurance have a positive impact on non-performing loans, while average urban employment salaries, regional GDP, and the non-performing loan ratio have a negative impact. Finally, based on the conclusions drawn from this study, relevant policy recommendations are proposed to provide guidance for commercial banks in China to mitigate the risks of non-performing loans.

Factors Affecting Non-Performing Loans of Commercial Banks in Malaysia

With the economy’s growth, the banking industry expands, and the competitiveness intensifies with the increased number of banks. Nevertheless, its non-payment also leads to huge losses for banks and the country. One of the critical determinants of the banking sector's performance is the loans advanced to get the profit. Therefore, the loans and their repayments are used as the comparison. Specifically, banks note their repayments seriously, and those default loans are declared non-performing loans (NPLs). Thus, NPL indicates a country’s banking system’s health. This study investigates the factors influencing Non-Performing Loans (NPLs) in the commercial banking sector of Malaysia from 2012 to 2021. NPLs are considered a crucial indicator of the banking system's health and the overall economic health of a country. The study examines the relationship between bank-specific and macroeconomic factors and their impact on NPLs. The bank-specific factors analyzed are loan-to-deposit ratios, capital adequacy ratios, and bank size. In contrast, macroeconomic factors are unemployment, inflation, and gross domestic product. Data were collected from published annual reports, the World Bank website, and DataStream navigators for ten years from 2012 to 2021, involving 26 commercial banks in Malaysia. Data analysis includes Descriptive Analysis, Correlation, Multicollinearity, and Multiple Regression Analysis using SPSS version 20 software. The result indicates that loan-to-deposit ratio, bank size, unemployment rate, and gross domestic product significantly impact the NPLs in the Malaysian Commercial Banks industry. Meanwhile, the capital adequacy ratio and inflation rate did not affect the NPLs in Malaysia.

Explaining Non-Performing Loans of Commercial Banks in Malaysia

This study examines the influence of bank size, capital adequacy, profitability and liquidity on non-performing loans (NPLs). The growing risk of non-performing loans leading to banks’ potential losses motivates this study to be conducted. This study includes commercial banks in the Main Market of Bursa Malaysia from 2010 to 2021. To test the hypotheses, this study employs a Fixed Effect model. The results show that bank size and capital adequacy have a significant and negative relationship with non-performing loans, indicating that banks with larger and higher capital adequacy have lower NPLs. Generally, this study found a limited number of commercial banks listed in the Malaysian market, providing a smaller sample. Nonetheless, the results of this study may benefit commercial banks in the significant factors to prevent the occurrence of non-performing loans.

Factors affecting non-performing loans in commercial banks of selected West African countries

This paper examines the macro-economic and bank-specific factors affecting non-performing loans in commercial banks. Using 47 listed commercial banks from six countries, namely 19 banks from Nigeria, 14 banks from Benin, 3 banks from Burkina Faso, 3 banks from Gambia, 3 banks from Guinea, and 5 banks from Liberia for the period 2008 to 2019, fixed and random effect model was used. The Hausman test favored the selection of fixed effect model, and it was found from the estimation that the liquidity ratio, capital adequacy ratio and inflation rate significantly affect non-performing loans. As a result, it is advised that banks depend not only on their ability to achieve the capital adequacy ratio, but also guarantee that loans are thoroughly scrutinized before being issued to beneficiaries. Bank managers should guarantee that banking staff is not simply awarding loans to secure their jobs by accumulating deposits from consumers at the price of the bank’s long-term stake. In addition, the economies of West Africa should keep their inflation rates low so that repayment of loans on time is cheap and realistic. AcknowledgmentI would like to appreciate Fezile Nonjabulo Gcwabaza for love and support throughout this research project.

Non-Performing Loans of Commercial Banks, and Their Causes: Evidence from Vietnam

Non-Performing Loans (NPLs) are a significant issue for all banks in Vietnam, attracting considerable attention from scholars. Our research aims to nd out the factors that affect the NPLs of Vietnamese commercial banks. The study uses Pooled Ordinary Least Square (OLS), Fixed effect, Random effect, and Generalized Least Square to examine secondary data of 28 commercial banks annually for the period 2008-2019. Consistent with previous research, the main finding shows that macroeconomic and microeconomic factors impact NPLs. Remarkably, provision for credit risk (PCR) has a significantly positive effect on the NPL ratio. Besides, foreign investor ownership (FOR) and bank size (SIZE) negatively affect the NPL ratio. Especially, for the positive correlation between foreign investor ownership and bank performance, the commercial bank should expand to enhance operational efficiency. Regarding macro factors, the results conclude that gross domestic product (GDP) growth and the unemployment rate (UEP) have a significantly negative relationship on NPLs. Therefore, the State Bank of Vietnam and the banks need to understand the leading causes as they directly relate to the banks in the context of the prevailing economic environment.This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium provided the original work is properly cited.

Bank-Specific and Macroeconomic Determinants of Non-Performing Loans of Commercial Banks in Bangladesh

Bank-Specific and Macroeconomic Determinants of Non-Performing Loans of Commercial Banks in Bangladesh

The Relationship between Lending Rate and Nonperforming Loans in Commercial Banks: Evidence from Pakistan (2008-2014)

The objective of the study was to examine the relationship between lending rate and nonperforming loans in commercial banks of Pakistan. The study collects data on bank size and nonperforming loans from the annual reports of commercial banks and lending rates data was collected from the state bank of Pakistan statistical bulletins for the period of 2008-2014 and the data was analyzed through SPSS to examine the relationship between lending rate and nonperforming loans. The study used correlation and regression methods. The study found a significant positive relationship between lending rate and nonperforming loans in commercial banks of Pakistan

Regulatory Capital is a Panacea for Efficiency, Credit Growth and Reducing Non-Performing Loans in Commercial Banks

This study examined the effectiveness of regulatory capital in enhancing efficiency and credit growth and reducing bad loans in commercial banks listed on the Pakistan Stock Exchange (PSX) from 2010 to 2019. Precisely, the impact of capital adequacy ratio (CAR) was studied on net interest margin (NIM), credit growth (CR) and non-performing loans (NPLs). The impact of capital adequacy regulations was assessed by retrieving data from financial statements analysis (FSA), Bank Financial statements and the World Bank website. Panel regression models including ordinary least squares (OLS), fixed and random effects under robust title were applied in this study. Results revealed that the implementation of stringent CAR plays the role of panacea and increases interest margin & credit growth and a reduction of NPL in Pakistani commercial banks. The study provides practical results for regulators to customize regulations on credit growth to reduce non-performing loans and maintain healthy growth of loans by not compromising on interest margins as well as maintenance of minimum capital adequacy ratios. With the high significance of stringent minimum capital adequacy for banks, the findings of the study are valuable for regulators, banks, auditors and investors, as capital adequacy ratio commonly plays the role of Panacea in terms of efficiency, credit growth and reduction in non-performing loans. Keywords: capital adequacy ratio, efficiency, credit growth, non-performing loans

Deprived Sector Lending and Non-Performing Loans in Nepal

This study investigates the empirical impact of deprived sector lending on the nonperforming loans of commercial banks in Nepal using secondary data collected from 27 commercial banks from the fiscal year 2009 to 2018 with 262 observations. The study employed the OLS regression method for the robustness test of the result. The study establishes empirical relation between deprived sector lending and nonperforming loan of banks which was the major motivation of this study. The basic regression result shows that beta coefficient of DSL is negative which indicates higher the ratio of deprived sector lending, the lower would be the NPL and vice-versa. Similarly, this study also examines the DSL movement's impact on NPL. The result shows that the beta coefficient of ∆DSL is significantly negative with ∆NPL. This indicates that the higher the growth of DSL, the lower would be NPL growth and vice-versa. This shows that the influence of DSL is very low as per this empirical result. Overall, the study shows there is an inverse relationship between deprived sector lending and nonperforming loan of banks. The result indicates that the remark of commercial bank’s on the deprived sector lending policy of NRB is not true. The operational cost might increase with direct lending to deprive sector and that leads to decrease in the bank’s overall profit but not increases their NPL.

Factors Influencing the Recovery of Non-Performing Loans in Commercial Banks: The Case of Exim Bank

This study aimed at evaluating different factors that influence the recovery of NPL by analyzing the management of NPL recovery in commercial banks in Tanzania. Using Exim Bank as the case study, the study evaluated NPL ratios, influence of internal management on recovery strategies, influence of third-party activities on NPL recovery and effects of regulatory guidelines on the recovery of NPL. SPSS was used to test the strength of the relationships between the study variables, using the Pearson Correlation Coefficient method. The study concluded that there is a negative strong relationship between NPL and net income, a positive strong relationship between internal management strategies and NPL recovery, a negative strong relationship between third-party recovery activities and NPL recovery and a positive strong relationship between the regulatory guidelines and NPL recovery. Keywords: Non-performing Loans, Commercial Banks, Exim Bank Tanzania DOI: 10.7176/EJBM/13-14-05 Publication date: July 31 st 2021

Applying Bayesian method to investigate determinants of non performing loans of banks in Vietnam

This study was conducted to determine the factors affecting non-performing loans of commercial banks in Vietnam for the period 2007 - 2018. The study applies the Bayesian approach and the Random-walk Metropolis-Hastings algorithm to evaluate the impact of micro and macro factors on non-performing loans of commercial banks. The dependent variable is non-performing loans, which is measured by the ratio of non-performing loans divided by total outstanding loans; the independent variables in terms of bank characteristics are non-performing loans of the previous year, profitability, bank size, bak loans, and bank capital; the macro variables are inflation and GDP growth. Research data was collected from financial statements of 30 Vietnamese commercial banks and the General Statistics Office of Vietnam from 2007 to 2018. To increase the reliability and efficiency of the model as well as reasonable Bayes inference, a convergence test of the MCMC chain was performed. The result of this study shows that non-performing loans of the previous year, bank size, bank loan, bank capital, and inflation have positive impacts on bank non-performing loans. In addition, bank profitability and GDP growth rate are factors that have the opposite effects. Based on the research results, the author proposes policy implications for the decision-makers to help banks reduce non-performing loans and promote banks to operate effectively and more efficiently.

Ідентифікація кваліфікуючих факторів впливу в контексті управління фінансовою стійкістю комерційного банку

The article is aimed at closer defining the theoretical provisions for improving the management of financial stability of a commercial bank and assessing its current state in the context of the impact of destabilizing factors. Scientific approaches to the definition of the category of «financial stability of a commercial bank» are considered, which allows to detail its characteristic features and form a comprehensive idea of the financial stability of a commercial bank as a system category, the timely estimation of benchmarks of which allows minimizing the impact of specific and systematic risks to the economic environment in conditions of high uncertainty. The article systematizes the normative legal acts regulating all potential aspects of the commercial bank's financial stability shift due to changes in the structure of capital, liquidity, solvency, credit risks and being part of the information provision for the analysis of financial stability of a commercial bank. The classification of factors influencing the financial stability of a commercial bank is generalized. The influence of the epidemiological crisis associated with the spread of COVID-19 on key benchmarks of the banking system in terms of assessing the financial stability of the banking institution is examined. The dynamics of changing the proportion of non-performing loans of commercial banks of Ukraine is analyzed, as lending creates the basis for ensuring a balance between temporarily free funds and the amount of resources required at the microlevel of the financial system for sustainable development. Particular attention is paid to the aspects of balance and sustainability of the resource base of the commercial bank, which led to a thorough analysis of the liabilities of the banking system from the position of influencing the financial stability of a commercial bank.

Investigating the factors affecting nonperforming loans in commercial banks: The case of African lower middle‐income countries

AbstractA nonperforming loan refers to a loan that is not paid as and when due, and it is a significant issue that banks need to keenly consider for them to exist and be stable. There are several factors accountable for nonperforming loans; some are firm‐specific, while others are macroeconomic factors. The study of banking sector stability is a foundation of modern macroeconomic policy of a bank‐based economy. In this view, this study aims to investigate the determining factors from both perspectives. This study used the dynamic panel regression analysis on 110 commercial banks from nine countries for the years 2010–2017 and a total of 880 observations were examined. The system generalized method of moments found that lagged nonperforming loan, lending rate, capital adequacy, credit growth, cost income ratio, as well as real interest rate, were the significant factors affecting nonperforming loans in lower middle‐income countries’ banking sector. Hence, it is recommended that commercial banks ought to establish regulations to amend their policies regarding credit advancement in alignment with the factors highlighted above. Also, banks need to ensure their loaned‐out funds are dedicated to the envisioned purpose via improved credit monitoring that would spur economic sustainability.

Bank Regulation and Level of Non performing Loans in Commercial Banks in Nakuru County Kenya

The study sought to determine the effect of bank regulation and level of nonperforming loans in commercial banks in Nakuru County Kenya. The specific objectives of the study were to explore the effect of capital adequacy on the level of nonperforming loans in commercial banks in Nakuru County Kenya, to find out the effect of asset quality on the level of nonperforming loans in commercial banks in Nakuru County Kenya, to evaluate the effect of liquidity management on the level of nonperforming loans in commercial banks in Nakuru County Kenya, to examine the effect of management efficiency on the level of nonperforming loans in commercial banks in Nakuru County Kenya and to determine the moderating effect of macroeconomic factors on the relationship between bank regulation and level of nonperforming loans. The literature review focused on portfolio theory of investment, capital asset pricing theory and the capital buffer theory of capital adequacy. The primary data was collected using structured questionnaires and secondary data was collected from the banking survey 2017 and central bank of Kenya annual supervisory reports. The study employed multiple linear regression analysis and the finding revealed that there exist a negative and statistically insignificant relationship between capital adequacy and non-performing loans. It was also observed that there exist a negative and statistically insignificant relationship between liquidity management and non-performing loans. On the other hand, there exist a positive and statistically significant relationship between asset quality and non-performing loans. Similarly, there exist a positive and statistically insignificant relationship between management efficiency and non-performing loans. Finally, the findings indicated that macroeconomic factors have moderating effect on the relationship between bank regulations and non-performing loans in commercial banks in Nakuru County. It was concluded that asset quality positively influences non-performing loans while management efficiency influence positively the non-performing loans. Similarly, liquidity management exerts a negative influence on non-performing loans. Finally, capital adequacy influence negatively on non-performing loans. The study recommends that Central Bank of Kenya should regularly access lending behavior to ensure compliance with banking regulations to avoid increasing incidences of non-performing loans. In addition, Central Bank of Kenya should closely monitor banks with deteriorating asset quality. Further, Central Bank of Kenya should strictly monitor the economic sector and ensure that banks provide adequate provisions for loans to mitigate risks of default. Furthermore, banks should maintain a good balance on deposits and lending out loans and adhere to regulators decisions about monetary policies. Finally, banks should increase the operational efficiency of operation weakness and improve corporate governance on the sanction of loans and Central Bank of Kenya should focus on managerial performance in order to detect banks with potential increases in non-performing loans.

Factors affecting non-performing loans of commercial banks: the role of bank performance and credit growth

The recent crisis of non-performing loans in the banking system has hit the Vietnamese economy hard. The GDP has been fallen down, while the bad debt ratio in the banking system has risen dramatically to 17.2 percent, and it takes more time to restore the economy and banking system. This research aims to define aspects that impact non-performing commercial bank loans in Vietnam. It covers the period of 2008–2017 using 200 identified banks of Ho Chi Minh City Stock Exchange and Hanoi Stock Exchange, and applies methods based on the regression of pooled ordinary least squares, fixed and random effects models, in particular, generalized least squares to confirm the stability of the regression model. The results show that non-performing loans this year will positively affect those in the next year. In addition, a raise in bank performance and credit growth also leads to the reduction in non-performing loans from banks. Regarding macroeconomic factors, higher interest rates would have a major and beneficial influence on failed loans in terms of macroeconomic dynamics, and, therefore, little effect on economic activity and inflation. Therefore, Vietnamese banking system should reduce the systematic risk and improve monitoring processes, drawing on the experience of global banks with extensive experience in risk management.

DETERMINANTS OF NON-PERFORMING LOANS: EVIDENCE FROM CONVENTIONAL BANKS IN MALAYSIA

Purpose of the study: This paper attempts to determine the determinants of non-performing loans in commercial banks in Malaysia. This study attempts to explore the specific bank factors as well as macroeconomics factors that are contributing to the non-performing loans. Methodology: This paper analyzes the data using eight local commercial banks in Malaysia. The data collected from the annual report and Data Streams database for the year 2009 to 2018. A panel data approach has been used to analyze the data. All the determinants regressed against non-performing loans by using STATA 14 as a tool. Main Findings: The results of this study present that capitalization had a significant negative relationship with non-performing loans, while the real effective exchange rate had a significant positive correlation with non-performing loans. Applications of this study: This study highlights the crucial factors of the non-performing loans that can be used by the bank or financial institutions. Novelty/Originality of this study: This study includes one new variable for the macroeconomics factors, which is the real effective exchange rate, and the result shows it is significant towards non-performing loans. Therefore, this study enhances the existing model with the new variable that can be used to find what is affecting the non-performing loans.

Non-Performing Loans in Banking Sector of Bangladesh: An Evaluation

Non-performing loan is a loan that is in default or close to being in default. Non-performing loans (NPLs) badly affects the health of banking sector and also economy of the nations. The main aim of this paper is to analyze the recent trend of NPLs in banking sector with reference to Bangladesh. The present study is based on the secondary data which have been collected from the report of Bangladesh Bank and websites of the scheduled banks of Bangladesh from the year 2003 to 2018. The study revealed that NPLs are the burning problems of the banking sector in Bangladesh for last few decades. The international standard of NPL is 2 percent or below but in our country it is much higher. The NPL percentages in Bangladesh are 5 to 6 times higher than the standard which is alarming for the sector. According to the reports of Bangladesh Bank (central bank of Bangladesh) Non Performing Loans ratio stood at 10.30 % in December 2018, 9.31 percent in December 2017, 9.23 percent in December 2016 and 8.79 percent in December 2015. It is observed that the NPL ratio is growing successively with the passage of time. So, as a credit controlling authority Bangladesh Bank should give more emphasize on the NPLs of commercial banks.

Modeling the influence of inflation on the level of non-performing loans in Cyprus commercial banks

The object of this research is the commercial banks of Cyprus. The paper examines the impact of macroeconomic changes, in particular inflation, on the level of non-performing loans in commercial banks. The macroeconomic indicators studied include inflation rates. The research methodology is based on theoretical and methodological analysis of the scientific literature, statistical and econometric methods, as well as observation, comparative method, description, measurement, analysis and modeling. To develop a statistical model that represents the relationship between inflation rates and non-performing loans in Cyprus, the author uses simple linear correlation and data analysis methods such as the correlation coefficient and the determination coefficient.The research results show that the resulting econometric model is acceptable, since the determination coefficient is equal to 0.504, and inflation indicators are decisive for the level of non-performing loans. This is due to the fact that the correlation coefficient between these variables is –0.710, and according to the Chaddock scale the coupling magnitude is high. In addition, the correlation coefficient of inflation and non-performing loans in Cyprus is statistically significant, since the value of the correlation coefficient is beyond the limits of critical values of |0.468|. Also from the research results it is found that in the case of Cyprus, inflation rates are negatively associated with non-performing loans, since the resulting correlation coefficient is a negative number. The resulting model is not used to compile a short-term forecast, due to the insufficient value of the determination coefficient (50.4 %). In general, it is proposed that policy makers devote considerable attention to the determinants of non-performing loans, as the deteriorating conditions of non-performing loans will affect not only banking institutions, but also the general state of the financial system of Cyprus. The practical significance of the research cited in the work lies in the fact that the research results can be used as reference material for business, government and education.