Problem Loans Research Articles

Valuation of non-recourse stock loan using an integral equation approach

An integral equation approach is adopted to price American-style non-recourse stock loans with finite maturities. In particular, we use Fourier transform to reduce the partial differential equation governing the price of an American-style non-recourse stock loan into an ordinary differential equation, the solution of which can be easily found (in the Fourier space) and analytically inverted into the original space. As a result, we can decompose the price of an American non-recourse stock loan into two main components: the price of its European counterpart and the early exit premium. This decomposition allows us to break the pricing problem of American stock loans into two simple steps: 1) finding the optimal exit prices; 2) calculating the American non-recourse stock loans. Our obtained numerical results appear to fit very well with those obtained from literature.

Structural modeling of the impact of bank nonperforming loans on the banking sector: the Ukrainian experience

The paper aims to develop scientific and methodological approach to assessing the interaction of nonperforming loans of Ukrainian banking institutions, the profitability of the banking sector and its financial stability, which will allow a more detailed assessment of the directions and degree of mutual influence of these elements. To substantiate this interaction economically and mathematically, structural equation modeling was chosen. Particularly, Statistica was chosen as a software tool to assess the adequacy of the resulting model and determine the level of statistical significance of its parameters. Six key indicators were selected as a research information base, two for each subject of research: indicators of nonperforming loans in the banking sector (the volume of nonperforming loans and the ratio of problem loans excluding capital reserves), profitability indicators of the Ukrainian banking sector (assets profit and rate of return on capital), and indicators of financial stability of the Ukrainian banking sector (regulatory capital-to-risk-weighted assets ratio and liquid assets-to-total assets ratio). For calculations, statistic data of selected indicators for 2005–2019 were used. As a result of calculations, mathematical data were obtained that accurately described the interaction of nonperforming loans of Ukrainian banking institutions, the profitability of the banking sector and its financial stability. The adequacy of the model was verified based on the following criteria: main summary statistics (ICSF criterion, ICS criterion, discrepancy function, maximum residual cosine), noncentrality fit indices (noncentrality parameter, population noncentrality parameter, Steiger-Lind RMSEA index, McDonald noncentrality index, adjusted population Gamma index), other single sample indices (Akaike information criterion, Schwarz criterion), and a normal probability plot.

Restructuring of problem loans of banks in times of crisis

Purpose. The aim of the article is the analysis of the current state of problem debts of Ukrainian banks, research of methods of restructuring problem loans and search for ways to optimize it in a crisis. Methodology of research. The following methods are used to achieve this goal: dialectical ‒ when clarifying the economic meaning of concepts and terms; analysis, synthesis, sampling, graphic ‒ in the study of the state and structure of problem loans; induction and deduction ‒ to determine the impact of negative factors on the domestic development of lending by commercial banks; comparison ‒ in the study of methods of restructuring problem loans against the background of crisis phenomena and processes. Findings. Such mechanism as restructuring is considered in the article for minimizing the level of problem loans. It is determined that the implementation of such procedure should take place on a systematic basis, according to uniform rules and apply to all banking institutions. Taking into account the world experience of problem debt restructuring, the need to improve the legal and regulatory framework for problem debt restructuring in terms of providing tax benefits and the introduction of a balanced procedure for restructuring loans at the state level, providing government guarantees to clients in difficulty with the financial crisis. The necessity of creating an effective mechanism for selling problem assets of commercial banks is substantiated, namely the creation of appropriate asset management companies, companies for repurchase of non-performing loans, etc. It is proposed to create a separate unit at the level of the banking institution, whose work will focus on choosing the best methods and scenarios for restructuring problem loans and monitoring this process, revealed the need to use automated methods to identify bad debts in banks, which will reduce the number of existing errors, eliminate the human factor and improve the quality of the credit process. Originality. The necessity of restructuring application by commercial banks of Ukraine against the background of crisis phenomena and processes is substantiated, the influence of restructuring methods on the borrower and the bank is systematized and the ways of improvement of restructuring in the process of working with problem loans are offered. Practical value. The proposed measures will provide an opportunity to achieve positive dynamics in working with problem loans both at the level of banks and at the state level; will allow to react quickly to unpredictable endogenous and exogenous destructive factors and to minimize risks of their influence on the basic financial and economic indicators of the deposit-taking corporation. Key words: restructuring, credit, commercial bank, borrower, problem loans, crisis phenomena.

IMPLEMENTATION OF THE SAW METHOD AS A DECISION SUPPORT FOR GIVING FEASIBILITY OF KUR ON BANK MANDIRI DRAMAGA BOGOR

Currently, the public's interest is very high to get KUR, but it makes it difficult for banks to determine who is eligible to receive the KUR and in the process of giving credit using the "LOS" system but this system is still quite a time consuming to analyze customer data and the process requires consideration and good analysis from the leader, due to the high number of problem loans. The SAW method used in this study. The SAW method is able to simplify and accelerate the results of credit lending recommendations. The calculation results obtained by debtors who are very worthy given credit as much as 1 debtor (4%), decent debtors with low risk as many as 16 debtors (70%), and worthy of being given with high risk as much as 6 debtors (26%) The purpose of this study to know the process and requirements for granting business credit at Bank Mandiri Dramaga Bogor.

Analysis of Problem Credit Sales Accounting Treatment in. Adira Finance Baubau

This study aims to analyze the accounting treatment for non-performing loans of credit sales at PT. Adira Finance Baubau. The analysis method that being used is descriptive qualitative method. While the collecting method are field research, library research and interview. This research is conducted at PT. Adira Finance Baubau during April 2017. The results showed that the accounting treatment for non-performing problem loans of credit sales at PT. Adira Finance Baubau will be recorded as operating loss of the company. Assets in the form of cars from troubled sales will be withdrawn and repaired, then offered back to the consumers. The income of those troubled cars sales and other new cars sales are expected to recover the company's losses due to the sale of non performing loans so that the performance of PT. Adira Finance Baubau will still look stable even though the company is haunted by business risks of non-performing loans of their own car credit sales.

INTERNATIONAL EXPERIENCE OF FUNCTIONING OF THE CREDIT SERVICES MARKET

Introduction. The country's economy is still in a state where its development is hampered by the absence of clearly defined, priority programs to stimulate business and economic sectors, including through credit. Bank lending to business entities is an effective way of getting out of the crisis. Strengthening the role of credit relations as a means of stimulating the development of production is manifested in various aspects. Methods. Fundamental economic theories, lending theories, financial studies, as well as research by scholars and foreign scientists are investigated in the research. They used the generally accepted principles of scientific research to make their decision. A number of general scientific methods were used in the process of research, in particular: analogies and logical generalization (to study the prospects of bank lending); systematic analysis (to study the organization of the process of bank lending in the market of credit services), etc. Results. Based on the isolated problems, the foreign experience of countries such as the USA, Germany, Argentina, Mexico, Poland, Canada and Italy was explored, on the basis of which the prospects for improvement of the bank lending mechanism in Ukraine and credit monitoring of the borrower in particular were outlined. Discussion. Given the overseas experience of developed countries, it is possible to distinguish: a combination of different methods of restructuring problem loans; when assessing the potential risk of default on a loan, use different methods of determining it ("SAMRARI", "PARSEL" or "Rule 5 C"); when making class calculations, make corrective adjustments to the credit score of the borrower. Prospects for further studies of the credit services market may be the intensification of bank lending, which certainly implies further liberalization of refinancing policy, taking into account foreign experience. Keywords: credit, credit relations, credit policy, credit services market, bank lending.

ANALISIS PINJAMAN BERMASALAH (LAR) TERHADAP RETURN ON INVESTMENT (ROI) UPK BUNGA TANJUNG PADA PINJAMAN BERGULIR PROGRAM KOTATANPA KUMUH (KOTAKU) DI DESA TANJUNG BARU KECAMATAN BATURAJA TIMUR

This study aims to determine whether the problem loans (LAR) affect the Return on Investment (ROI) UPK Bunga Tanjung on the Loans without Slums City Program (KOTAKU) in Tanjung Baru Village, East Baturaja District. The method used in this research is descriptive method. By using qualitative and quantitative data analysis techniques. The results obtained by the ratio of problem loans (LAR) UPK Bunga Tanjung in the Revolving Loans of the City without Slums Program (KOTAKU) in Tanjung Baru Village, East Baturaja Subdistrict always increase with an average ratio of 15.53%. While the Return On Investment (ROI) ratio always decreases with an average ratio of 10.15%. Non-performing loans (LAR) greatly affect the level of Return On Investment (ROI) in revolving loans UPK Bunga Tanjung Without Slum City Program (KOTAKU) in Tanjung Baru Village, East Baturaja District in 2014-2018. A small level of non-performing loans will benefit the UPK and conversely a high level of problem loans will reduce the profitability of the UPK. Keywords: Non-performing Loans (LAR), Return On Investment (ROI), Slumless City Program (KOTAKU).

Kredit Bermasalah sebagai Pemoderasi Pengaruh Tingkat Penyaluran Kredit terhadap Profitabilitas

Abstract
 This study aims to empirically challenge the moderation of Non-Performing Loans to the effect of Credit Distribution Rates on Profitability. The population of 81 bank companies listed on the Indonesia Stock Exchange in the period 2014-2018 and which met the criteria of the research sample (purposive sampling) were 22 companies. The research method uses survey methods with quantitative research approaches, the analytical tool used is moderation regression. This study concludes that the level of credit distribution has a significant positive effect on profitability and the existence of the problem loan variable is proven to be a moderating variable that weakens the relationship between the level of credit distribution and profitability.
 

Asset Quality & Risk Management Practices - An Analysis on Yes Bank

Indian banks have a dual challenge of dealing with bad loans on one hand and hurrying to be fully BASEL III compliant on the other. Both the Reserve Bank of India (RBI) and the Government of India are using various approaches over the past two decades to help banks. Several different experiences are obtained by domestic and global banks in handling the non-performing loans (NPL) problem. Yes Bank Limited is India’s 4 th largest private sector bank. It has the industry-best NPA ratios and is renowned for its best practises in the banking industry. Can risk management practices and focus on asset quality help banks maintain loan quality and even stop loans from not slipping into the vicious Non-Performing Asset (NPA) cycle? Data from quarterly & annual reports and other reports is collected to understand management philosophy and asset quality dimensions such as NPA ratio, provisioning coverage ratio, concentration of NPAs, priority sector lending and restructuring of accounts. As the bank evolved from a mid-size bank into a large-size bank in the last 14 years, it gives an opportunity to pose the question - Will NPA size increase as bank transformed from a mid-sized bank to a large bank? Will knowledge-driven sectoral approach to assist customers in their business by lending and offering industry specific financial solutions help the bank? Can technology be used to predict and give early warnings before loans turns sour?

Pravni aspekti problematičnih kredita u Republici Srbiji - pitanje odgovornosti

The paper is motivated by the author's research into the issue of problem loans which present a serious obstacle to economic development. Taking into consideration the fact that a large amount research has been done with a goal of mitigating the effects of problem loans, the author attempts to investigate the causes of their and discusses the issue of the relationship between legal and social liability. The paper presents an analysis of the liability provisions of participants in the context of problem loans. Problem loans, in a broader sense, refer to any loans where there are problems in repayment, i.e. there is a risk in terms of an inability of a debtor to repay their debt. The main hypothesis is that each participant of the loan activity is liable for their actions, be they legal in nature or not. Applying logical, axiological, goal-oriented, and comparative law method, the author concludes that there is a need to strengthen liability and control mechanisms.

Evolutionary Game Analysis of Campus Credit Strategy Selection Under Incomplete Information Conditions

Since the China Banking Regulatory Commission issued relevant policies on standardizing the credit card business of college students in 2009, college students' credit cards have gradually withdrawn from campus business. In recent years, with the rapid development of the Internet, Online campus loan began to take the college student market as the goal, and quickly entered the university campus through recruiting student cadres to carry out carpet promotion activities inside the campus. And seized the current situation of college students' lack of financial knowledge and the psychology of comparative consumption, the business volume expands rapidly. The subsequent malignant events, such as 10g naked slip, huge profits and fund-raising, college students jumping off buildings to commit suicide due to their inability to repay the loan, also have a negative impact on the society. In view of the above phenomena, this article combines existing research on existing problems of campus loans, and establishes an evolutionary game model between the campus online platform and college student borrowers from the perspective of evolutionary games. The game model has two stable points (1, 1), (0, 0), namely, the campus platform chooses to deceive the borrower, the borrower chooses to break the trust, and the campus platform chooses not to deceive the borrower, and the borrower keeps the trust. This paper discusses the influence of the changes of the relevant parameters in the model on the choice of the game strategy, and puts forward some suggestions to establish a two-way scoring mechanism for online lending, increase the financial knowledge reserve and income of college students, and help them establish a correct consumption view to standardize the campus online lending work.

Još jednom o kreditima indeksiranim u švajcarskim francima

The problem of loans indexed in Swiss francs has stimulated the debate regarding the legality of these loans and the legality of state intervention to protect debtors during the last decade. The problem is not new since the issue of changes in the value of monetary obligations has occupied a legal mind for many centuries. Th e theory of monetary nominalism has been generally used in comparative law to regulate monetary obligations, while the valorist theory has served as its corrective. It is necessary to answer under which conditions the nominalist theory should step back, and the valorist theory should be applied? In search for the answer, the author explains the development of the institute of changed circumstances (rebus sic stantibus), emphasizing the contemporary approach to allow for the accepting of the extraordinary changes of commercial factors and the subsequent frustration of the contract's commercial purpose as justifications for the breach of contract or its amendment by courts. Th e European countries have solved the problem of loans indexed in Swiss francs by adopting special laws on the conversion of the CHF debts and by annulling the CHF loans on the grounds of the failure of banks to inform their customers about risks related with the undertaking of debts indexed in foreign currency. Th e author analyses the Serbian Law on conversion of living property loans indexed in Swiss francs and the legal opinion of the Serbian Supreme Cassation Court on the nullity of the Swiss francs contract clause in the light of comparative law views on the issues of the changes in the value of monetary obligations and the duty to inform in pre-contractual stage.

A comprehensive approach to assessing the level of economic security of Ukrainian banks

Existing methodological approaches to assessing the level of economic security of Ukrainian banks are revealed and the need to improve them is substantiated. The author proposes the method of determining the level of economic security of banks at the micro level. Estimated values of economic security indicators and their assessment in points made it possible to group institutions by the level of economic security and to determine the positioning of banks depending on ownership. Institutions with a high level of economic security include banks, which, according to 8 indicators, have accumulated a total number of 61 to 80 points. A satisfactory level of economic security is characteristic of banks, whose quantitative assessment for a certain amount of indicators ranges from 41 to 60 points. Low levels of economic security are inherent in institutions with an overall score of 21-40. Institutions with a critical level of security include banks with a total score of up to 20 points, whose activities are accompanied by violations of indicator values and destabilizing effects on the banking system. The validation of this methodology was carried out in all solvent banks of Ukraine, which operated in 2015 and 2019. Based on the grouping of institutions by the level of economic security, the threats and dangers that accompanied the activities of banks were identified. The main threats to the economic security of state-owned banks were: the highest share of problem loans in the aggregate loan portfolio, risk of operating activities, reduction of their lending activity. Institutions of foreign banking groups were largely characterized by high, satisfactory, and low levels of economic security. This methodological toolkit is suggested to be used to strengthen the market position and increase the security of the functioning of Ukrainian banks.

Issues of using vintage analysis (va) in the audit of problem loans in banks

Issues of using vintage analysis (va) in the audit of problem loans in banks

Incomplete and Inconsistent Information Analysis Method Considering Time Factors: Dynamic Paraconsistent Soft Sets and Their Application to Decision Making

Paraconsistent soft sets can address issues involving incomplete and inconsistent information simultaneously. In this paper, paraconsistent soft sets are furtherly extended to dynamic paraconsistent soft sets by introducing time factors. We define some basic operations, such as dynamic paraconsistent soft subsets, complement, “AND”, restricted intersection, relaxed intersection, restricted cross and relaxed cross. Subsequently, we also propose the definitions of dynamic paraconsistent soft decision system, compound time choice value, compound time decision value, compound time weighting vector and final decision value. Additionally, we construct a decision making algorithm for dynamic paraconsistent soft sets, which can address issues involving both dynamic incomplete and inconsistent information. Furthermore, we apply the proposed algorithm to a practical loan problem for small and micro enterprises. Finally, we perform a sensitivity analysis and a comparative analysis to prove the effectiveness and feasibility of the proposed algorithm.

How Does the Unfair Contract Terms Directive Penetrate National Legal Systems? – A Case Study Based on Mortgage-Secured Loans for Housing Purposes, Indexed or Denominated in CHF in Poland

The main aim of this article is to present the process of how the Unfair Contract Terms Directive was accepted into the Polish legal system. In order to do so, it first briefly explains, how the problem that allowed the massive testing of the Unfair Contract Terms Directive, i.e. the vast amount of consumer mortgage-secured loans for housing purposes, indexed or denominated in CHF (further: the CHF loans) came into existence in Poland. The story of the CHF loans also perfectly illustrates how the Polish legal system, which had taken a very liberal turn after 1989, struggles with the EU consumer protection concepts (which might also be representative for other countries of young democracies). It shows how the lack of adequate reactions of the governmental agencies led to burdening the judiciary system with the weight of the CHF loans problem, and how the Polish courts have not been sufficiently prepared for applying EU law. As an example, the article presents three issues that are at different stages of development when it comes to the completeness of the dogmatic construction, and which vary, when it comes to the degree of their intertwining with EU law.

Critical Analysis Reasons of Non-Performing Assets: An Analytical Study

“When a person delays the payment of the loan or an amount which was due on him through the delay in payment in either interests or instalments or principal amount, that particular loan or amount is termed as Non-Performing Asset.” The stability of a nation's banking sector is best gauged by the its margin of non-performing assets (NPAs) in the total assets. This study's objective is to examine the growing trend of the NPA in the sector in order to determine the specific contributions made by the major banks. Banks in the private sector’s NPA rise is not as quick as that of banking institutions, SBI, and its affiliates, according to study. Due to the ineffective management of the problem of subprime loans by the banking institutions and the affiliate banks of SBI, the rise in such loans has been very significant.

Современные подходы к оценке и выбору вариантов погашения проблемной ссудной задолженности

The article suggests the significant proportion of bad debt to be one of the main problems of the modern bank lending system in Russia. In banking practice, the debt of borrowers is considered problematic if there is a delay in the principal debt and / or interest during 60 calendar days or more (the last 180 calendar days). The presence of bad debt requires creating reserves for possible losses on loans, which can reduce the financial result and the loan portfolio quality 
 of banks, so paying off bad loans is an urgent task for commercial banks. There is no single algo-rithm for choosing the best way for debt repayment. There has been analyzed the research of evaluating the value of claims and calculating the maximum amount of debt repayment. The factors determining the existing structure of problem debt repayment in banks have been investigated; factors 
 of assessing the effectiveness of debt repayment by concluding assignment contracts have been considered. The author's approach to calculating the financial result and cash flow under different ways 
 of fulfilling the obligations of borrowers has been proposed. The calculations and comparison of variants to pay off a debt of a specific borrower on the basis of a financial model have been made. Due to the divergence of cash flows, the assignment of claims to the bank is found the preferred method for debt repayment. It has been stated that the assignment of claims has several advantages over other methods of debt repayment: it helps to save the lender from the costs related to the repayment of bad loans; from the need to reserve additional funds provided for compensation of possible losses; replenishment of working capital, partial coverage of their losses, improvement of official statistical indicators by reducing the share of problem loans; concentration on their business.

BANKING SECTOR PERFORMANCE, PROFITABILITY, AND EFFICIENCY: A CITATION‐BASED SYSTEMATIC LITERATURE REVIEW

AbstractThis study presents a citation‐based systematic literature review on banking sector performance, particularly in terms of profitability, productivity, and efficiency. Specifically, the study aims to identify the leading sources of knowledge in terms of the most influential journals, authors, and papers. The paper presents a content analysis of the 100 most cited papers. In total, 1996 peer‐review papers were found relevant in the Scopus database by using a comprehensive list of keywords. The results show that the Journal of Banking & Finance appears to be the leading journal in terms of publication count and citations. Based on total citations, Allen Berger is the most prolific author. The most cited paper is “Problem loans and cost efficiency in commercial banks” by Allan Berger and Robert DeYoung. The content analysis of the top 100 papers identifies five essential themes: determinants of efficiency, methodology, ownership, financial crises, and scale economies. In terms of estimation approaches, 74% of papers employed frontier analysis, which includes 34% parametric and 40% nonparametric methods, and remaining 26% have used financial ratio analysis. Additionally, stochastic frontier and data envelopment analysis are widely used in parametric and nonparametric methods, respectively. An intermediate approach is extensively adopted for the specification of inputs and outputs.

An Analysis of Financial Report on Profitability of Financial Institutions In Indonesia Stock Exchange

This research was conducted to determine the effect of liquidity, NPL, and capital structure on the profitability of banking financial institutions on the Indonesia Stock Exchange partially and simultaneously. The research method uses a quantitative approach. Data analysis techniques used in this study were multiple regression analysis techniques. Testing research data using the classic assumption test, normality test, multicollinearity test, heteroscedasticity test, and autocorrelation test. The results showed that 1) Liquidity variables have an influence on bank profitability. This causes the customer to trust the bank in providing credit services due to the bank's ability to refinance its obligations to customers who hold their funds using current assets that are running well. 2) The NPL variable has no influence on bank profitability. This causes the amount of problem loans to be greater, causing problems, namely losses caused by the rate of return on bad loans. 3) Variable capital structure has no influence on bank profitability. This is because bank capital is not channeled to the public, thus making the capital unproductive and not producing profits for the company. 4) Simultaneously changes in liquidity, NPL and capital structure variables together have a significant effect on the profitability of banks on the Indonesia Stock Exchange.