Problem Of Non-performing Loans Research Articles

The Impacts of Non-Performing Loans upon the Prices of Stocks in Jordanian Commercial Banks

The purpose of this study can be seen through the major attention that was given to the problem of non-performing loans by the banking institutions. Such attention was given to this problem due to the several impacts it has upon commercial banks and which may extend to affect the whole banking system, the current study aimed at identifying whether there is a statistically significant impact for the non - performing loans upon the prices of stocks or not in Jordanian commercial banks at the significance level of (a = 0.05). This study was concerned with investigating the Jordanian commercial banking sector during the period of (2005 –2015). The current study has given great attention to this sector because it is considered as the most vital sector in the Jordanian economic system. This study also shows that there is need for training workers in applying the credit policy that is being adopted. Such training should raise the practical efficiency levels of those employees. The study also showed that banks’ control should be stricter and they should set more dissuasive penalties in relation to granting facilities without having adequate guarantees.

Banking reforms, performance and risk in China

ABSTRACTWe investigate the impact of the banking reform started from 2005 on ownership structures in China on commercial banks’ profitability, efficiency and risk over the period 2000–2012, providing comprehensive evidence on the impact of banking reform in China. We find that banks on average tend to have higher profitability, lower risk and lower efficiency after the reforms, and the results are robust with our difference-in-difference approach. Our results also show that the Big 5 state-owned banks (SOCB) underperform banks with other types of ownership when risk is measured by non-performing loans (NPLs) over the entire study period but tend to have fewer NPLs than other banks during the post-reform period. Our results provide some supporting evidence on the ongoing banking reforms in China, suggesting that attracting strategic foreign investors and listing SOCBs on stock exchanges appear to be effective ways to help SOCBs deal with the problem of NPLs and manage their risk.

Predicting Non Performing Loan of Business Bank with Data Mining Techniques

The non-performing loans (NPL) prediction plays an important role in business bank. However, there is still a large gap between the requirement of prediction performance and current techniques. In this paper data mining approaches is used to predict the NPL. Both macroeconomic and bank-specific variables are collected to form the feature set firstly. Based on selected features, the study firstly applies single basic classifiers such as decision tree, k nearest neighbors and support vector machine (SVM) to model the problem of NPL. Bagging and AdaBoost are described in this paper as two different method of multiple classifier fusion, to build prediction models. In this experiment, non-performing loans data with 96 features and 10415 instances of a business bank is collected. F-mean and The Area under the ROC Curve (AUC) are considered as metrics of classification. The results illustrate that multiple classifier fusion algorithms outperform single basic classifier. The model built by multiple classifiers fusion can produce better prediction results. Furthermore, the AdaBoost method performs much better than bagging method in processing NPL.

Cleaning-up Bank Balance Sheets: Economic, Legal, and Supervisory Measures for Italy

To stabilize and bring down nonperforming loans (NPLs) in the Italian banking system, the Italian authorities have been implementing a number of reforms, aimed among others at speeding up insolvency and enforcement proceedings, strengthening bank corporate governance, cleaning up balance sheets, and facilitating bank consolidation. This paper examines the Italian banking system’s NPL problem, which ties up capital, weighing on bank profitability and authorities’ economic reforms. It argues for a comprehensive approach, encompassing economic, supervisory, and legal measures. The authorities’ reforms are important steps toward this end. The paper describes measures that could further support their actions.

Cleaning-Up Bank Balance Sheets: Economic, Legal, and Supervisory Measures for Italy

To stabilize and bring down nonperforming loans (NPLs) in the Italian banking system, the Italian authorities have been implementing a number of reforms, aimed among others at speeding up insolvency and enforcement proceedings, strengthening bank corporate governance, cleaning up balance sheets, and facilitating bank consolidation. This paper examines the Italian banking system's NPL problem, which ties up capital, weighing on bank profitability and authorities' economic reforms. It argues for a comprehensive approach, encompassing economic, supervisory, and legal measures. The authorities' reforms are important steps toward this end. The paper describes measures that could further support their actions.

Regulatory Arbitrage and Bad Loans

The banks’ forbearance lending to weak firms was one of primary reasons for the prolonged non-performing loan problem in Japan. We analyze whether regulatory arbitrage using lax enforcement of capital requirements was a motive for Japanese banks to continue loans to weak firms. We find evidence supporting the view that regulatory arbitrage was a motive of bad loans Two measures of regulatory arbitrage, the difference between the risk-based capital and the market-valued capital as a proportion of bank asset, and the subordinated debt as a proportion of bank asset, are useful in uncovering evidence that Japanese banks had the perverse incentive of extending bad loans in an attempt to inflate regulatory capital in the 1990s.

The politics of bank bailout in Japan: a cognitive capture and leadership view

This article explores why the Japanese government did not decisively intervene on behalf of bank bailouts at the early stage of the banking crisis of 1997–98 and investigates the institutional and political context behind the use of fiscal money for bank bailouts in 1997–98, 1998–99, and 2001–05. In contrast with prevailing views, which emphasize the conflicts of interest or differences in policy preferences between politicians and bureaucrats and their captured nature either by bankers’ special interests or political/bureaucratic interests, this article argues that Japanese policymakers shared a congruent policy preference — that is, minimizing the disruptions in the existing institutional arrangement in government-bank-firm relations and this congruence in policy preference (or ‘cognitive capture’) compelled the government to take a creditor-centered approach to the banking problem — i.e., letting banks resolve their own problems. It also argues that a strong political leadership that can break with the ‘cognitive capture’ and sustain government's resolute commitment to solving the nonperforming loan problem is an essential factor for successful bank restructuring.

Prioritas Alternatif Keputusan pada Analisis Kredit Motor

Non-performing loans are common problem faced by financing companies. One of the companies which is exposed to this problem is a motorcycle dealer. Object of this research is PT. AM, a motorcycle dealer of brand Yamaha. Corporate leaders realized the problem of non-performing credit, and they tried solving the problem by conducting strengthens analysis credit with the purpose to sustain the operational in the future. The methods used in this research were standard credit scoring and method of comparison exponential as decision-making to determine the sequence of alternative counsel by plural criteria. The technique of the data collection was directly face-to-face unstructured interview through. On the stage of standard credit scoring analysis, the data obtained process by giving value. Next on the stage analysis using method of comparison exponential, used the calculation of parameters and eckenrode method. The final results of this research were that good analysis management of credit can reduce the problem of non-performing loans. It is proven of 3 debtor non-performing in notes of the company was 3 debtor equal to the result predictions of this research.

The Normalization of Deviant Organizational Practices: The Non-performing Loans Problem in China

Research on deviant organizational practices has demonstrated that normative and cognitive institutional forces contribute to making deviance acceptable. Data from a survey of 3,751 Chinese firms were applied to test the idea that a clearly articulated alternative identity is necessary if a firm is to resist the normalization of deviance. Widespread acceptance of delinquency in repaying loans was shown to make it more likely that a firm adopts that practice, but this normalization process is less likely for firms with a stronger anti-deviance identity.

Japan’s Malaise: A Comment

For Japan, the 1990s was a lost decade. What caused Japan’s star to fall so low, so fast? Most analyses of Japan’s economic malaise since the 1990s emphasize domestic factors. The main arguments blame the non-performing loan problem in the banking sector and/or Japan having slipped into a “liquidity trap”. These arguments point to monetary solutions to Japan’s crisis. More extreme views are that Japan’s woes are the result of a failed model and that thoroughgoing reforms of its domestic economic structures are required. External factors such as the high yen have not been ignored in the mainstream discussion of Japan’s malaise, but neither have they generally been seen as the critical factors. This paper takes, as its point of departure, the observation that the last period when Japan had what might be termed a “normal” economy was the first half of the 1980s, prior to the steep appreciation abetted by the Plaza Accord. The transformation of Japan under the pressure of a high exchange rate is shown to be at the heart of Japan’s long-running malaise. Alternative theories such as the burst bubble/bad assets in the banking system, and excessive savings due to rapid population ageing are examined critically. The role that Japan’s trade policies may have contributed to this outcome by resisting a swing of the current account into deficits is highlighted. The conclusions point to Japan requiring a substantially lower exchange rate than is often thought; at the same time, a significant yen depreciation could only be contemplated as part of a trade deal that opens Japan’s markets to imports. This points to a trade and exchange rate solution to Japan’s problems.

Depositors' Discipline and Nonperforming Loan Problem

Depositors' Discipline and Nonperforming Loan Problem

Bank insolvency and the problem of nonperforming loans

Bank insolvency has been a significant problem in many parts of the world in the last 30 years. There have been waves of bank failures in developed and developing countries, and also in countries with transitional economies. Between 1997 and 2002, banks had to be closed in more than 50 countries. This paper focuses on one particularly important aspect of the cause of bank insolvency: the relationship between nonperforming loans (NPLs) and bank failure. It will consider both the prevention and control of NPLs and in so doing will examine regulatory and supervisory issues as well as initiatives for dealing with impaired assets. The need for an effective bank insolvency law is a crucial factor which is also addressed. The main aim of the paper is to provide some guidance on a framework for developing and transitional economies, many of which are still suffering severe problems with NPLs.

Toward Developing a Structured Approach to the Diagnosis and Resolution of Nonperforming Loans: The Case of China and India1

AbstractThis article addresses the issue of nonperforming loans (NPLs) from a public policy perspective. The focus is on three aspects of NPLs that we consider essential for a proper analysis: the degree of the NPL problem, the causes of NPLs and the solutions adopted to address an identified NPL issue. This research analyses the diverse definitions and measurements of an NPL. Further, it introduces the distinction between systemic and situational causes of NPLs. Arguing that different causes require different cures, this study emphasizes a mix of short‐term and long‐term remedial measures as judicious in dealing with the NPL problem. This framework is then applied to two case studies: China and India. The conclusion identifies future directions of research, such as the study of a threshold level beyond which NPLs may pose a barrier to a country's growth and productivity.

占有による執行妨害

When a debtor can not repay the debt, the lender can foreclose the debtor's mortgaged real estate. However illegal occupier in the real estate often obstructs the foreclosure procedure. Such obstruction reduces the value of the real estate and it is considered as one of the serious factors of non-performing loan problem in Japan. In recent Japanese law reform, many anti-obstruction rules were introduced so that we expect the foreclosure procedure become more effective than before.

China's Asset Management Corporations

To address the banking system's non-performing loan (NPL) problem, the Chinese government set up four asset management corporations (AMCs). They were to buy up bad debts of the big four state-owned commercial banks and dispose of them over 10 years, taking a large step towards NPL resolution. But in their first two years, these AMCs have made only a limited contribution to resolution of the NPL problem. They have taken over less than half of the NPLs at the big four banks. In addition, while AMC financing have been less than transparent, it appears to have burdened The People's Bank of China (PBoC) with greater risks to date than the Ministry of Finance (MoF), although there have not been to date any evident monetary consequences. Under plausible recovery scenarios, the AMC losses would surpass the current financial contributions to the AMCs from both the MoF and the PBoC. Since their cash recoveries have lagged their interest obligations, the AMCs face rising cash flow pressure. In response, the government is pushing for speedier asset recovery, as evident in the milestone of the first international NPL auction.

The Use of CDO Structuring for the Disposal of Non-Performing Loans in China

This paper briefly introduces the problem of non-performing loans in China. It traces their origin within the history of the Chinese banking system and attempts to quantify the scope of the problem. An analysis of recent efforts to address non-performing loans is presented, with particular focus on the creation of the four Asset Management Companies. The author presents an optimal solution for the disposal of non-performing loans and explains the mechanics. That solution employs collateralized debt obligation structuring and offshore issuance of asset-backed securities. Finally, the paper introduces a hypothetical inaugural Chinese non-performing loan collateralized debt obligation (NPL CDO), with an analysis of the expected structure and detailed economics of such a transaction.

Taming the Asian Tiger

The article explores the issue of non-performing assets affecting the Asian continent. It examines the scope of the problem, the landscape of market participants, and how the restructuring effort is evolving in different regions in Asia. The Asian financial crisis of 1997-1998 created a large number of financially distressed companies in Southeast Asia, which to this day continue to weigh down the continent9s economies. Japan has been dealing with its own problem of troubled loans crippling the banking sectors for the past decade and a half. And China, having become a major force on the world economic arena, for the first time has had to admit and find a solution to its massive non-performing loan problem.

Dealing with Non-Performing Loans: Political Constraints and Financial Policies in China

The stagnation in banking sector reform is puzzling given the Chinese leadership's seeming resolve to reform other sectors of the economy. This article develops a political explanation of why reform oriented central bureaucrats have centralized financial power without liberalizing the banking sector. The starting point of this explanation is that top bureaucrats value political survival as much as other members of the Politburo. Thus, they make policies based on both political and economic considerations. This framework is tested on three cases related to China's non-performing loan (NPL) problem: the politicization of the NPL problem, policies designed to slow the creation of NPLs and policies aimed at decreasing the pool of NPLs. The findings strongly suggest that political considerations play a large role in shaping financial policies in China.

Change and Crisis in the Japanese Banking Industry

The weakness of the Japanese banking industry, suffering from acute problem of non-performing loans, prevents Japan from restoring sound growth rates despite having undertaken structural reforms and substantial fiscal policy efforts, and, through impairing transmission channels of monetary policy, it has also made ineffective efforts to stimulate the economy through "zero interest rates" and quantitative easing policy. Misunderstanding the roots of the banking crisis contributed greatly to its exceptional length and depth and prevented its early solution. Poor coordination and sequencing of liberalisation of financial services together with macroeconomic policy mistakes have been responsible for the crisis. But the origins of those mistakes can be traced to the bureaucratic character of the country's policy-making process often lacking a comprehensive analysis of macroeconomic effects of a particular policy decision. Simple solution to the banking crisis in the form of eliminating non-performing loans burden, bailing out ailing financial institutions etc., if not accompanied by decisive steps restoring rationality to the public spending and resolving the problems arising from the presence of the government sponsored financial institutions, may not be sufficient to achieve sound growth and prevent similar crises in the future.

The Current State of the Japanese Economy and Remedies

Japan has reached the limits of conventional macroeconomic policies. Lowering interest rates will not stimulate the economy because widespread excess capacity has made private investment insensitive to interest rate changes. Increasing government expenditure in the usual way will have small effects because it will take the form of unproductive investment in the rural areas. Cutting taxes will not increase consumption because workers are concerned about job security and future pension and medical benefits. Expanding the monetary base will not induce banks to increase investment loans because the proportion of nonper-forming loans in their portfolios is growing because of the prolonged economic stagnation. In order for sustained economic recovery to occur in Japan, the government must change the makeup and regional allocation of public investments, resolve the problem of nonperforming loans in the banking system, improve the corporate governance and operations of the banks, and strengthen the international competitiveness of domestically oriented companies in the agriculture, construction, and service industries.