Bank Non-performing Loans Research Articles

Non-performing bank loans, their causes and ways to treat them in Iraq (Al-Rafidain and Al-Rasheed bankers as a model)

Non-performing bank loans, their causes and ways to treat them in Iraq (Al-Rafidain and Al-Rasheed bankers as a model)

Non-performing bank loans, their causes and ways to treat them in Iraq (Al-Rafidain and Al-Rasheed bankers as a model)

The process of granting loans from banks is considered as the confidence that you give to customers، but this confidence should not be the main factor adopted by the bank when granting loans، even if these loans were granted according to sound banking foundations and controls that involve significant risks that may The bank is exposed to it due to the customers’ refusal to pay the loan or the interest resulting from it، and this leads to weakening the ability of banks to grant more loans، which are among the most important sources on which they depend in achieving profits and returns for the bank. Therefore، the problem of non-performing bank loans is one of the main problems that Many banks suffer from it، which leads to obstructing the work of these banks، and one of the most important reasons that led to the exacerbation of this problem is the inefficiency of the banking administration، errors in the feasibility study، and the failure to study the integrity of credit decisions when granting loans. In order not to fall into such problems and avoid them، they must be carefully studied and scientific tools and methods should be used with regard to bank guarantees and decisions. The ratio of non-performing loans to the total loans granted to Rafidain Bank (64.31%) in 2015، and for Al-Rasheed Bank، it amounted to (51.20) for the same year، and the reason is due to various factors such as bad loans and debts before (2003) in addition to the two banks granting loans to small projects without guarantees And housing loans، these loans were not repaid، in addition to the security and economic conditions that Iraq was exposed to، which negatively affected the reserves and profits of the two banks through the bank deducting part of the profits it obtains in order to pay off doubtful debts.

Bank non-performing loans, loan charge-offs, and crime incidence

This study examines whether banks’ non-performing loans (NPL) and loan charge-offs (LCO) are associated with state crime rates in the U.S. Our empirical results show that both NPLs and LCOs are significantly and positively associated with crimes incidence. After disaggregating the crime rates, we find a significant and positive association between the two financial reporting variables (NPL and LCO) and property crimes such as larceny, burglary, robbery, and motor vehicle theft. We conclude that bank financial reporting variables, such as non-performing loans and loan charge-offs, can serve as leading indicators of crime rates.

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.

Determinants of Non-Performing Loans (NPLs); Evidence from Banking Sector of Pakistan

The main aim of the current study is to theorize an inclusive assessment of the factors of non-performing loans from banking sector in the setting of Pakistan. In this connection, adequate criticism of contemporary literature is being provided in context of relevant macroeconomic indicators which might aggravate the level of Non-Performing Loans (NPLs) in the conventional commercial banks of Pakistan as well as other regions. As per the study of literature, it has been found that corruption, political stability, accountability, investment profile, credit bank to private area and energy crisis affects the NPLs of conventional banks. In addition, factors like lending interest rate, unemployment, GDP and inflation do explain the variation in NPLs of the banking sector. Political stability, lack of capital capability, lack of efficiency, nominal emphasis on NPLs and lack of efficiency are the present issues being faced by the country. On the other hand, an increase in NPLs affects the internal factors including efficiency, profitability, bank size and capital. It has also been found that NPLs surge through inaccurate decisions by the organizations and political intervention in the banking sector. As per the outcomes of the studies, it has been observed that operational productivity and effectiveness have an adverse and significant relationship with NPLs. The lawmakers should accomplish a vigorous financial state of banks through manufacturing extra revenues. In this way banks will be in a better position to explore the credit worthiness of the creditors which will be ultimately helpful for better loan management. Once the key factors for increase in NPLs are determined, the banks will establish stable and efficient policies for loan management. The purpose behind determining these internal as well as external factors is not mere to highlight their significance but to chalk out measures and directions to control the stability of banking sector and the financial structure.

Economic policy uncertainty, bank nonperforming loans and loan loss provisions: are they correlated?

PurposeThis paper examines the correlation of economic policy uncertainty (EPU) with nonperforming loans and loan loss provisions for 22 major developed countries over the 2008–2017 period.Design/methodology/approachThe study used the Pearson correlation methodology to assess the correlation between EPU, bank nonperforming loans and loan loss provisions.FindingsThe findings reveal that EPU is negatively correlated with nonperforming loans and loan loss provisions in the banking sector of EU countries but not for non-EU countries. Also, EPU is negatively correlated with nonperforming loans in the banking sector of the most advanced economies – the G7 countries, while loan loss provisions are more responsive to changes in EPU than NPLs in EU countries.Practical implicationsThe implication of the findings is that the correlation of EPU with loan loss provisions and nonperforming loans is influenced by regional characteristics.Originality/valueThis study is the first to analyze the association of EPU with bank nonperforming loans and loan loss provisions under regional classifications such as the EU, non-EU and the G7 countries. This study provides insights on how regional differences might explain the co-movement of EPU with bank nonperforming loans and loan loss provisions.

The Influence of Risk Management Committee Characteristics on Bank Asset Quality

Strengthening the banking sector have remain a critical issue in most financial markets. Therefore, thispaperconducts a review on whether ban k risk management committee (RMC) characteristics can influence bank asset quality, measured as the ratio of banks non-performing loans (NPLs) in Nigeria. To achieve the objective of the study, a review ofprior literature that have examined series of RMC characteristics on several corporate outcomes was considered. The review showed that certain characteristics of the RMC may improve the risk governance of banks. These characteristics include the RMC independence,RMC size,RMC meetings, RMC gender, RMC expertise, presence of CEO on the RMC, RMC chair-gender and RMC chair-independence. Thus, future studies can examine whether the RMC characteristics play any significant role towards reduction of non-performing loans of Nigerian banks, thereby improving banks assets quality. Investigating this issue is necessary because sound financial system promotes economic growth.

Bank non-performing loans in the fintech era

This study investigates the behaviour of bank non-performing loans in the fintech era. Using data from 35 developed countries from 1998 to 2016, the findings show that non-performing loans are fewer in the second wave of the fintech era. Also, bank non-performing loans are positively related to the state of the business cycle in the second wave fintech era. Countries that have high supply of credit to the private sector experience high non-performing loans in the second wave fintech era. The two-way interaction analysis shows that non-performing loans are lower during times of economic boom and when there is higher credit supply in the second-wave fintech era.

Determinants of Commercial Bank's Non-Performing Loans in Bangladesh: An Empirical Study

Determinants of Commercial Bank's Non-Performing Loans in Bangladesh: An Empirical Study

Corporate stress and bank nonperforming loans: Evidence from Pakistan

Using detailed administrative Pakistani credit registry data, we show that banks with low leverage ratios are both significantly slower and less likely to recognize a loan as nonperforming than other banks that lend to the same firm. Moreover, we find suggestive evidence that this lack of recognition impedes loan curing, with banks with low leverage ratios reporting significantly higher final default rates than other banks for the same borrower (even after controlling for differences in loan terms). Our empirical findings are consistent with the theoretical prediction that classifying a nonperforming loan is more expensive for banks with less capital.

Analysis of Nonperforming Debts' Impact on Profitability and Liquidity of Some Iraqi Commercial Banks for the Period between 2011-2018

In the banking world, the non-performing debts are considering one of the main critical that have almost all commercial banks attention. Hence, this study aimed to know the impact of non-performing loans on profitability and liquidity of commercial banks, where it has found a fundamental impact on its various profitability activities such as return on equity assets. The study was conducted on a group of the Iraqi commercial banks, 10 banks, for the period (2011-2018), and panel data models were used to analyze and demonstrate the impact of non-performing bank loans on profitability, return on equity (shareholders ’equity), and return on assets. In return, the study did not find such an impact of liquidity size because it determines by monetary authority represented by Central Bank of Iraq (CBI) and it related significantly to loans, the higher the proportion of loans the greater the proportion of its reserves.

The impact of efficiency on asset quality in banking

ABSTRACT We investigate the impact of banks’ ability to minimise costs on asset quality, by assessing the temporal relationship between these variables in a sample of Italian banks over the period 2006–2015. We offer new insights into the channels through which bank efficiency affects non-performing loans by disentangling the short-term component of cost efficiency from its long-term component. We show that non-performing loans afflicting Italian banks can be explained by both efficiency components. A decrease in short-term cost efficiency precedes a worsening in banks’ asset quality, implying that regulators should consider adopting short-term efficiency as an early warning indicator of a deterioration in asset quality. We also present evidence of a trade-off between long-term efficiency and bank non-performing loans, which suggests that the removal of exogenous hindrances that prevent banks from allocating optimal levels of resources to the management of their loan portfolio should be a main policymakers’ objective.

Corporate stress and bank nonperforming loans: Evidence from Pakistan

<ns2:p>Using detailed administrative Pakistani credit registry data, we show that banks with low leverage ratios are both significantly slower and less likely to recognize a loan as nonperforming than other banks that lend to the same firm. Moreover, we find suggestive evidence that this lack of recognition impedes loan curing, with banks with low leverage ratios reporting significantly higher final default rates than other banks for the same borrower (even after controlling for differences in loan terms). Our empirical findings are consistent with the theoretical prediction that classifying a nonperforming loan is more expensive for banks with less capital.</ns2:p>

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.

Investigating the non-performing loans of banks and comparing it with some countries (with Emphasizing on the interest-free banking law in Iran)

Investigating the non-performing loans of banks and comparing it with some countries (with Emphasizing on the interest-free banking law in Iran)

Does financial inclusion reduce non-performing loans and loan loss provisions?

We examine whether countries that have high levels of financial inclusion have fewer non-performing loans and loan loss provisions in their banking sectors. The fixed effect panel regression methodology was used to analyse the effect of financial inclusion on bank non-performing loans and loan loss provisions. Using data from 48 countries, we find that greater formal account ownership is associated with high non-performing loans. Bank loan loss provisions are fewer in countries that have high levels of financial inclusion only when financial inclusion is achieved through the combined use of formal account ownership, bank branch supply and ATM supply. Also, non-performing loans are fewer in countries that experience economic boom and high levels of financial inclusion

MINIMIZATION OF PROBLEM LOANS IN BANKS: ECONOMIC AND LEGAL ASPECT OF STATE REGULATION

Abstract. The authors of the article have studied the problem of managing non-performing loans within loan portfolios. It has been substantiated that Ukraine as a developing country is in such socio-economic conditions of development that increase credit risks for banks. Numerous studies of the determinants for the formation of loans portfolios in countries with different levels of economic development demonstrate that developing countries are prone to negative consequences that lead to insolvency of debtors in case of a drop in the GDP, inflation, legal uncertainty, political crises, etc. The lack of long-term experience of banks in solving problems of increasing the share of non-performing loans in banks’ portfolios demonstrates that minimization of such assets requires regulation at the level of the banking system, but not a separate bank. Based on statistical data, it has been demonstrated that the minimization of problem loans of banks gained significant positive dynamics only after the National Bank of Ukraine regulated the process of managing distressed assets by adopting a regulatory act. Detailing the process of legal regulation of managing distressed assets allowed banks to structure and organize the work of their divisions in accordance with the normatively defined life cycle of distressed asset in such a way that all measures taken by them affect the efficiency of their work. Using permits, prohibitions and obligations as legal means of regulating relations between banks and their debtors, those relations have become predictable, allowing banks to control the process of managing non-performing loans and make timely decisions on the use of tools to minimize the share of distressed assets of the bank. The wide choice and consistency of applying financial and legal instruments in the process of managing non-performing loans allows banks to maximize the contractual settlement of debt and address to the competent authorities for the application of state coercion to debtors. Direct prohibitions, which are provided in the procedure of writing-off impaired assets, prevent corruption manifestations in this process. However, the authors have argued that the practice of 2008—2019 in terms of managing non-performing loans of banks demonstrated that the effectiveness of this process directly depends on government regulation. If the economic preconditions for the formation of problem loans depend on various factors of objective and subjective nature, then the management of non-performing loans directly depends on the existing legal models in the state for solving this problem. The autonomy of banks and their right to independently determine their strategies for managing distressed assets does not provide the desired efficiency without the imperative intervention of the central bank. Thus, the state regulation of the life cycle of distressed assets has demonstrated its effectiveness, and thus confirmed the need for regulatory influence on the processes of minimizing non-performing loans in Ukrainian banks. Keywords: non-performing loans, distressed assets, agreement-based regulation, state influence, state coercion, legal regulation. GEL Classification G18, G21, G34, K12, K42 Formulas: 0; fig.: 2; tabl.: 0; bibl.: 12.

A Panel Data Analysis on Determinants of Economic Growth in Seven Non-BCBS Countries

The phenomenon of economic growth indicates the increase in a country’s wealth during a certain period of time. Given the complexity of the phenomenon, there is a manifold of factors influencing its level. The study examined the determinants of economic growth in seven countries that are not members of the Basel Committee of Banking Supervision, namely Bolivia, Czech Republic, Estonia, Malaysia, Peru, Poland, and Thailand, for the decades 1990–2019. Our set of predictors included bank capital to assets ratio, bank liquid reserves to bank assets ratio, inflation, interest rate spread, bank nonperforming loans to total gross loans ratio. By means of panel data analysis and a random effects econometric model, we showed that economic growth proxied by gross domestic product growth rate was mainly driven by bank capital to assets ratio across the three decades. The implications of our empirical results could assist national authorities interested in elevating the level of economic growth for the benefit of the overall society.

Analysis of Non-Performing Loans Indicators and Their Treatment in The Kurdistan Region – Iraq: A Practical Study Of Sample Of Banks For 2019.

The study aims to identify the indicators of non-performing loans of banks working in the Kurdistan Region-Iraq, and provide appropriate solutions to solve this problem and try to avoid NPLs in the future, and the study has reached a range of results, including: We conclude that there is corruption in the higher management of banks and use public position to serve the private interests, which is one of the reasons for the NPLs, due to the administrative and financial corruption in the Kurdistan Region. The ratio (37.5%) of the working banks believes that there is bad faith in the borrowers and unwillingness to pay their debts despite their ability to refund. The ratio (34.56%) of the working banks did not study the borrower's good reputation. The ratio (30.06%) of the working banks believe that the borrowers did not do thorough study in expanding their investment activity. NPLs in the working banks in the Kurdistan Region have been caused by the emergence of Daash in Iraq and bad economic management by the Kurdistan Region government led to the emergence of the financial crisis in the Kurdistan region and then impose a system of saving on staff. The study concluded with a number of suggestions: The lack of intervention by senior management in the process of granting loans, and away from social considerations. After stage of the float, Resuscitation and pull out the borrower, the courts and Jurisdictions are the best option available to the working banks to processing the NPLs. Access of private banks to the movable and immovable property of the Government of against its NPLs. Implement effective banking systems in the area of credit monitoring and follow up. Granting loans by banks in the form of payments and according to the actual needs of the borrower.

Macroeconomic factors that influence the bank loans rate in international and Ukrainian practice

The goal of the paper is to disclose the links between the dynamics of macroeconomic indicators and the level of bank loan rates based on international and Ukrainian practice. On the basis of the previous analysis, the paper also aims to identify the key trends in the formation of loan prices in the long run and identify problematic issues related to bank loan rates. The main characteristics of bank lending rates in Ukraine are: a) their high rates; b) sharp changes in the weighted average bank loan rates from year to year; c) higher loan rates for households compared to the cost of bank loans for businesses; d) higher bank loan rates for short- and medium-term loans versus long-term ones; e) lower rates on loans in foreign currency compared to the loans in hryvnia; and f) high share of non-performing loans to households and businesses in bank portfolios. In the context of world and Ukrainian practice, the paper demonstrates the reverse effect between macroeconomic indicators such as GDP per capita, the ratio of loans to GDP, the ease of doing business index and bank loan rates. The article also demonstrates a direct relationship between the dynamics of inflation rate in the country, the dynamics of non-performing bank loans and their rates.