Problem Loans Research Articles

ANALISIS PERBEDAAN RASIO KEUANGAN BANK UMUM KONVESIONAL DAN BANK UMUM SYARIAH SERTA PENGARUHNYA TERHADAP PENYALURAN KREDIT ATAU PEMBIAYAAN (Studi empiris yang tedrdaftar di BEI periode 2013-2016)

This study aims to obtain evidence of differences in financial ratios of conventional commercial banks and sharia commercial banks, as well as the influence of financial ratios, liquidity, capital adequacy, problem loans, profitability, operating efficiency of lending. This study uses secondary data. The sample in this research is conventional commercial bank and sharia public bank listed on BEI with 4 year observation period (2013-2016). This sample was chosen by purposive sampling method. Independent sample t-test is used to test whether there is difference of average of two interconnected samples, multiple linear regression is used as data analysis technique as many as 148 general data of banking company, conventional bank and syariah commercial bank as many as 44 company data period 2013-2016 . The results of this study indicate that there are differences in average liquidity, problem loans, profitability, operating efficiency, While the average capital adequacy there is no significant difference between conventional commercial banks and sharia banks. While liquidity and profitability have a positive effect on lending, non performing loans and operating efficiency have a negative effect on lending, and capital adequacy does not affect credit disbursement.

Credit risk management in banks from the perspective of jurisprudence

The level, structure and nature of problem loans are a significant source of credit risk in the banking business, with the main reason for developing and increasing problem loans indicate the need for a comprehensive and strategic approach to solving them. In addition, the accumulation of problem loans in banks' balance sheets negatively affects the credit activity of banks and, consequently has a negative impact on economic activity, primarily due to reduced availability of possible sources of financing both for companies and for the population. One of the main reasons for the increased credit risk exposure of banks, especially before the outbreak of the subprime crisis, are less developed models for evaluation and measurement of credit risk, as well as a poor assessment of collateral. Therefore, this paper points out to the importance of careful management of credit risk as well as the need to develop appropriate methods and models for the early detection of problem loans and reducing exposure to credit risk. In the last part of the paper, the author provides an overview of the most important collaterals, with specific reference to domestic jurisprudence.

The efficiency effects of bank mergers: An analysis of case studies in Vietnam

This paper employs Data Envelopment Analysis to examine the relative efficiency for Vietnamese banks from 2008 to 2015. Efficiency level is relatively high and remains stable over the examined period, suggesting the banking system is less affected by the global financial crisis. More specifically, technical efficiency and scale efficiency in Vietnamese banking is examined when controlling for problem loans. We suggest that controlling for the exogenous impact of problem loans is important for joint-stock banks. Furthermore, our results do not support the hypothesis that acquiring banks are more efficient than the acquired banks. The efficiency improved in majority of merger cases and was not related to acquiring bank’s efficiency advantage over its targets. Small-and medium- banks should be promoted in future acquisitions as a means to enjoying efficiency gains. Finally, there are mixed results on the extent to which the benefits of efficiency gains are passed on to the public.

Problem Loans in the Caribbean: Determinants, Impact and Strategies for Resolution

The high level of nonperforming loans (NPLs) in the Caribbean has been, in large part, a legacy of the global financial crisis, but their persistence owes much to the weak economic recovery in the region, as well as to structural obstacles to their resolution. A comprehensive strategy is needed to address these impediments to sever the adverse feedback loops between weak economic activity and weak asset quality. This paper finds that NPLs are a drag on Caribbean growth and macro-financial links are strong: a deterioration in asset quality hinders bank lending and dampens economic activity, undermining, in turn, efforts to resolve problem loans. A multifaceted approach is needed, involving a combination of macro- economic policies to support growth and employment; strong supervisory frameworks to ensure macro-financial stability and create incentives for resolution; efforts to address informational gaps and deficiencies in insolvency and debt-enforcement frameworks; and development of markets for distressed loans. The institutional capacity constraints require coordination of reforms within the region and support from international organizations through capacity-building.

Problem Loans in the Caribbean: Determinants, Impact and Strategies for Resolution

The high level of nonperforming loans (NPLs) in the Caribbean has been, in large part, a legacy of the global financial crisis, but their persistence owes much to the weak economic recovery in the region, as well as to structural obstacles to their resolution. A comprehensive strategy is needed to address these impediments to sever the adverse feedback loops between weak economic activity and weak asset quality. This paper finds that NPLs are a drag on Caribbean growth and macro-financial links are strong: a deterioration in asset quality hinders bank lending and dampens economic activity, undermining, in turn, efforts to resolve problem loans. A multifaceted approach is needed, involving a combination of macro- economic policies to support growth and employment; strong supervisory frameworks to ensure macro-financial stability and create incentives for resolution; efforts to address informational gaps and deficiencies in insolvency and debt-enforcement frameworks; and development of markets for distressed loans. The institutional capacity constraints require coordination of reforms within the region and support from international organizations through capacity-building.

Interest Rate, Corporate Membership and Loan Repayment by Borrowers from Micro-Financial Institutions in Nakuru County

The purpose of this study was to determine the relationship between interest rate, corporate membership and loan repayment in MFIs in Nakuru County. The study was guided by two objectives; to investigate the role of interest rate in loan repayment in MFIs in Nakuru County and to analyze the role of corporate membership in loan repayment in MFIs in Nakuru County. The study adopted correlation design and was guided by multiple regression models. The study collected data through structured questionnaires that had adequate research items on every research indicator. Collected data was analyzed using STATA and results were presented using tables. The findings of the study revealed that interest rate is not a determinant of loan repayment in Micro Financial Institutions in Nakuru County and it was concluded that interest rate charged on a loan does not impact on repayment. Similarly, it was evident that corporate membership is not significant determinant of loan Repayment in micro financial institutions in Nakuru County. The study recommends that institutions should establish a close relationship between the lenders and the borrower through monitoring, business advice and regular meetings. The institution can also develop a reward system to those borrowers who repay their loans on time through discounts on subsequent loans and savings. Further studies should be conducted to examine if the following determinants are associated with loan repayment in MFIs period of membership, security given, utmost good faith, consistency of payment during previous loan and social problems.

CLO Trading and Collateral Manager Bank Affiliation

This paper investigates whether the type of institutional affiliation of a collateralized loan obligation (CLO) manager influences the manager’s access to information and risk appetite. We base our investigation on CLO managers’ trading of distressed loans. Our findings reveal that CLO managers affiliated with banks start to sell off their positions in loans arranged by their bank well before the onset of default and continue to do so even after default. In contrast, CLO managers affiliated with nonbanks do not lower their credit exposures to distressed loans. These findings are consistent with bank-affiliated CLO managers having access to private information but also being more concerned to mitigate the reputational risk exposure of their banking organization. On close inspection, we find that reputational concerns are a significant factor in the decision to divest defaulted loans. Although the value of private information after default is moot, we find that bank-affiliated CLO managers are significantly more averse to holding their own arranged problem loans than holding distressed loans arranged by unaffiliated banks. Besides helping us understand CLO managers’ trading activities, our findings also highlight a potential limit to banks’ ability to originate loans and distribute them via their affiliated CLOs.

GIJZELING; METODE PENYELESAIAN KREDIT MACET HUKUM PERDATA

Bad Creditisa problem loan or a non-performing loanthat for some reasons a customer reneging on promises to pay off debts after due dateso there is a delay or not paid altogether so that arose a bad credit or a bad debt.The existence of bank can not be separated from risk in the banking world. So it is necessary to minimize them by keeping the quality of loans in a case of nonperforming loans.Gijzeling is an effort to press the case of a bad credit which is the act to a physical or an agency of a debtor by entering them into prisonso that they loses the right to freedom.This act is expected to be a deterrent effect, because they feel uncomfortable with any restriction in action, so that the debtor decide to immediately pay or pay off that debts

Microfinance: The Impact of Multiple Borrowings of Microcredit among Clients of Microfinance Institutions in Central Uttar Pradesh Region of India

Microfinance is the supply of loans, savings, and other basic financial services to the poor. Beginning of the microfinance movement is most closely associated with the economist Muhammed Yunus, who in the early 1970's was a Professor in Bangladesh. In the midst of a country-wide famine, he began making small loans to poor families in neighboring villages in an effort to break their cycle of poverty. The study has focused on the repayment problems of loans to be taken by the clients of ‘For Profit Making Microfinance Institutions (MFIs)’. Micro financing has boomed in recent years. Though founded as non-profit institutions, Indian Microfinance industry has been turbocharged by private – equity firms, nearly doubling in the year ended March 31, 2008 delivering $ 2.5 billion loans. Many microfinance lenders have recently registered as for – profit finance firms with the Reserve Bank of India, giving them wider access to funds but limiting them to ‘reasonable’ interest rates. Those rates are still high – between 20% and 40% annually, according to the Consultative Group to Assist the Poor, or CGAP, hosted at the World Bank location. This creates the need for multiple borrowings. In this research, the researcher has used the regression analysis to study the effect of Age, Gender, Number of Dependent and Education level due to multiple loan contracts. Further, the relationship between variables taken in this research has been analyzed such as income of respondents and amount of loans. The findings show that actually, the multiple borrowings of clients of MFI’s are not benefiting them and in reality they are affecting their livelihood.

Nonperforming Loans and Purchase of Loans by Public Asset Management Companies in Malaysia and Thailand

AbstractThis paper explores the factors which eliminated the nonperforming loan (NPL) problem in Malaysia and Thailand following the 1997 Asian financial crisis. The number of NPL, which expanded in the aftermath of the crisis, has since declined in most South‐East Asian countries. Although previous studies have explored the causes of the increase in NPL numbers, few have analysed the factors that contributed to the reduction in their number in Asia. In Malaysia and Thailand, authorities put in place several measures to manage NPL. As a vehicle to acquire NPL from banks, Malaysia established the Pengurusan Danaharta Nasional Berhad (Danaharta) in 1998, while Thailand established the Thai Asset Management Corporation (TAMC) in 2001. We analyse whether the characteristic features of banks, improvements in macroeconomic conditions, and facilities for purchasing loans caused a reduction in the number of NPL in Malaysia and Thailand. The results suggest that selling loans to a public asset management company was effective in reducing the number of NPL in Thailand. While macroeconomic conditions influenced the decline in NPL ratios in Thailand, in Malaysia, well performing commercial banks and large commercial and investment banks generally had smaller NPL ratios throughout and following the crisis.

Corruption in bank lending: The role of timely loan loss recognition

Building on the recent literature on corruption in bank lending, we examine the effect of country-level timely loan loss recognition by banks on lending corruption using a unique World Bank dataset that covers more than 3,600 firms across 44 countries. We find evidence consistent with timely loan loss recognition constraining lending corruption because it increases the likelihood of problem loans being uncovered earlier. In further analysis, we find timely loan loss recognition to be less associated with reduced corruption in countries where there is significant government ownership in the banking system and deposit insurance schemes. This evidence is consistent with timely loan loss recognition being less of a deterrent to lending corruption when banks are less disciplined by their capital providers.

Determinants of Problem Loans: Non-performing Loans vs. Loan Quality Deterioration

<p class="1main-text">The growing literature on credit risk determinants provides results that are based on the set of bad loans present in the bank's assets especially non-performing loans. Besides this classic proxy, the present paper examines the determinants of loan quality deterioration by using a qualitative measure. Actually, we take advantage of a detailed dataset containing information on the quality of loans contracted by banks to different Tunisian firms. The study aims to detect if credit risk determinants are different through quantitative and qualitative proxies. We take into account bank-specific indicators that are likely to affect banking credit risk. Overall, the results show that cost inefficiency, bank profitability is common determinants of the credit risk level and the loan quality deterioration, that are differently influenced by bank size and capitalization.</p>

Directions of improvement of agricultural enterprises lending system in Ukraine

In the article problems of farm loans are considered, as well as tendencies of bank lending are analyzed. An improvement of the possible directions of agricultural enterprises crediting are drawn.

The Efficiency Effects of Bank Mergers: An Analysis of Case Studies in Vietnam

This paper employs Data Envelopment Analysis to examine the relative efficiency for Vietnamese banks from 2008 to 2015. Efficiency level remains relatively high and stable over the examined period, suggesting the Vietnamese banking system is less affected by the global financial crisis. More specifically, technical efficiency and scale efficiency in Vietnamese banking in 2008 is examined when controlling for problem loans. The findings suggest that controlling for the exogenous impact of problem loans is important in Vietnamese banking, especially for the joint-stock banks. Furthermore, evidence from the bank merger cases studied does not support the hypothesis that acquiring banks are more efficient than the acquired banks. The efficiency improved in majority of merger cases and was not related to acquiring bank’s efficiency advantage over its targets. Small- and medium-banks should be promoted in future acquisitions as a means to enjoying efficiency gains. Finally, there are mixed results on the extent to which the benefits of efficiency gains are passed on to the public.

Beggar Thy Neighbor: A History of Usury and Debt by Charles R. Geisst

Beggar Thy Neighbor: A History of Usury and Debt, by Charles R. Geisst. Philadelphia, University of Pennsylvania Press, 2013. vi, 388 pp. $39.95 US (cloth). Charles Geisst provides an intriguing survey of usury from Cicero, Marcus Brutus, and Roman law through to the financial crisis of 2008. This is an admirable attempt to view debt across a long chronological perspective and ask if moral concerns about usury and interest are now obsolete. As the title of the book suggests, the underlying theme is predicated upon distinguishing between usury as the predatory charging of excessive interest, which might unjustly pauperize borrowers, and a more pragmatic acceptance that interest was beneficial to business and economic growth. Ultimately, Geisst appears to regard changes over time as a victory of practicality over moral censure: Capitalism emerged from the shadows of church dogma (97). The first three chapters of the book provide a whistle-stop tour through the classical, medieval, and early modern periods, with a litany of pre-modern thinkers presented. To a certain extent, Geisst offers a series of potted biographies about prominent theorists or bankers, each of interest but resulting in less discussion about how moral concerns were perceived or circumvented in everyday practice. Credit had increasingly permeated the lives of medieval and early modern people and was built upon a complex system of trust and obligation, as Craig Muldrew has shown. Nonetheless, Geisst covers an admirable range of sources and periods, particularly highlighting natural law perspectives on usury and early attempts to calculate compound interest. The development of financial markets and banking in England and the Low Countries dominates chapter three, where Geisst argues that usury prohibitions remained but were employed more flexibly. The forces behind this change are attributed both to a Weberian Protestant ethic and broader commercial developments such as mercantilism and the use of joint stock companies. Geisst regards the efforts to liberalize credit from moral strictures as a foundation for productive loans, economic growth, and modern capitalism. The main emphasis is on lenders and theorists, so this is not primarily a story about borrowers, despite the neighbours in the book title. Borrowers are discussed to a certain extent in relation to nation states, bankruptcies and debtors' prisons, the rise of consumerism, and the growth of personal debt. Geisst argues that early sumptuary laws were intended to stem excessive temptations to buy, but such restrictions were replaced by a concept of as aspiration, exemplified by the American Dream in the twentieth century. Consumer protection was made more difficult when borrowers acquiesced to the consumer boom. Geisst identifies a long-lived problem of consumption loans made to individuals for small amounts of money at extortionate (173), with market rates available only to companies or governments for business or capital investment. Loan sharks and payday loans are thus an age-old problem, with loans collateralized for more than their value. It was only with the expansion of lending options that the paucity of small loans at reasonable rates was partly addressed, as with the innovation of credit cards just after WWII. …

Determinants of Loan Quality: Lessons from Greek Cooperative Banks

Abstract The article focuses on the credit risk of cooperative banks in Greece. The main objective is to define which factors are responsible for variations in loan quality during the period 2003-2014. Loan quality is measured by Loan Loss Reserves Ratio (LLR) and dynamic regression techniques are implemented for the econometric estimations. The outlined results suggest that the macroeconomic environment (i.e. public debt, local unemployment, economic activity and inflation) and the accounting ratios (i.e. past loan quality and profitability) seem to be the explanatory variables of problem loans.

The Relationship Between Accounting Practices and Effects of Financial Crisis in Turkey: A Case Study on an Oil Company

Many reasons lie at the base of all financial crises from the past to the present. If we take into consideration the 2008 subprime mortgage crisis, the only reason cannot be mortgage loans. But the mortgage issue continued to advance and created several other problems. Definitely, the source of mortgage loans problem also had many roots. One of the reasons was the lack of correct use of accounting principles and auditing. This is a strong proof and indicator that, there are many accounting based reasons behind the occurrence of the financial crises. Many examples can be given showing moving away from the basic principles of accounting rules and the general accounting concepts. Moreover, institutions being not fully independent, running creative accounting practices, having problems with fair valuation and transparency issues, presenting unreal financial reports, and sharing misleading audit reports are all related to financial crises.Furthermore, specific businesses and people abuse accounting rules, standards and related legislation for the sake of their own interests. Accounting and finance history has shown us that, even audit institutions, credit institutions and rating agencies are getting unfair advantages and generating unethical cash by making intentional accounting and finance errors, which is actually categorized as fraud.The aim of this study is to analyze financial crises and to determine if accounting practices have any relationship with financial crises. The research investigated an oil company’s financial and operational indicators before and after the 2008 financial crises with related tables and figures. Also, an interview was run with the company’s accounting officer. Based on the statements of firm’s accounting officer, correct accounting practices defended firm from several negative effects of the 2008 financial crisis.

To Separate or Not to Separate Investment from Commercial Banking? An Empirical Analysis of Attention Distortion Under Multiple Tasks

In the wake of the 2008/2009 financial crisis, a number of policy reports (Vickers, Liikanen, Volcker) proposed to separate investment banking from commercial banking to increase financial stability. This paper empirically examines one theoretical justification for these proposals, namely attention distortion under multiple tasks as in Holmstrom and Milgrom (1991). Universal banks can be viewed as combining two different tasks (investment banking and commercial banking) in the same organization. We estimate pay-performance sensitivities for different segments within universal banks and for pure investment and commercial banks. We show that the pay-performance sensitivity is higher in investment banking than in commercial banking, no matter whether it is organized as part of a universal bank or in a separate institution. Next, the paper shows that relative pay-performance sensitivities of investment and commercial banking are negatively related to the quality of the loan portfolio in universal banks. Depending on the specification, we obtain a reduction in problem loans when investment banking is removed from commercial banks of up to 12 percent. We interpret the evidence to imply that the higher pay-performance sensitivity in investment banking directs the attention of managers away from commercial banking within universal banks, consistent with Holmstrom and Milgrom (1991). Separation of investment banking and commercial banking may indeed be associated with a reduction in risk in commercial banking.

The problem of currency-indexed loans: Case of 'CHF'

Currency indexation entered the legal system of Serbia by changes of the Law of Contract and Torts in 1993 due to great economic movements and inflationary pressures. Law permitted contracting of loans in which the obligation can be tied to a foreign currency, so that the payment is done on the day according to the parity of that currency with the national currency. This form of currency indexation has a protective character, it should maintain the real value and equality of mutual giving between the contracting parties, but today, in case of 'CHF' it has become usurious and it seriously compromises the equivalent of mutual giving in the contract. In this paper the authors provide the analysis of creation and basic characteristics of problems of loans in CHF and based on the conducted research, suggest actual measures for overcoming the problems of more than 20 000 citizens of Serbia.

A Study on the Impact of Financial Intermediation on Economic Growth: Panel Evidence from West Africa

A Study on the Impact of Financial Intermediation on Economic Growth: Panel Evidence from West Africa Bah Boubacar Alpha, Yibing Ding, Kone Abdrahmane, Mohamed Kargbo Abstract Weak growth episode has been the case in many African countries since 1970 up to 2000s. One fundamental intermediation gap in the Sub-Saharan Africa (SSA) region is the extremely limited financing for medium to long term lending facilities to promote growth. This situation is also the case for the West Africa (WA) region. The financial sector in the WA region is faced with problems of non-performing loans, weak credit evaluation mechanism, and high intermediation cost. Given the importance of financial development on economic growth, this study therefore, investigates the impact of financial intermediation on economic growth in WA countries. The study adopts panel data framework from 1985 to 2013. The findings of the study among others indicate that interest rate spread and inflation are high, as shown by the result of the summary statistics. In terms of the dynamic panel growth regression, broad money (M2) and the level of financial intermediation (M3) impact positively on growth in the region. Credit supply, inflation, and interest rate spread impact negatively on growth in the West Africa Region. The findings of this study are relevant to policy makers in formulating appropriate growth policies that can enhance sound and stable financial intermediation. These findings also are of significance to development organizations that are assisting with the growth process of African countries in shaping the future financial sector infrastructure and hence economic growth in the entire West Africa region and global. Full Text: PDF DOI: 10.15640/jmpp.v4n1a3