Problematic Loans Research Articles

Dampak Restrukturisasi Perjanjian Kredit Terhadap Jaminan HakTanggunganDalam Upaya Penyelamatan Kredit Bermasalah

The aim of this research is to determine the impact of credit agreement restructuring on mortgage guarantees in aneffort to rescue problem loans. To achieve this goal, the approach method used is empirical juridical. Data sourcesinclude primary data and secondary data. Primary data is data obtained directly by conducting field research in theform of free, guided interviews with respondents. Meanwhile, secondary data consists of primary legal materials,secondary legal materials and tertiary legal materials. The data obtained was then analyzed qualitatively.Conclusion: Based on the results of research and analysis of data collected by the author, it is concluded that theimpact of credit agreement restructuring on mortgage guarantees in efforts to save problematic loans is: theposition of collateral whose credit agreement has been restructured through an addendum deed is that theguarantee remains valid because the object of the guarantee Bank Jateng has charged it with a guarantee institutionin the form of a mortgage which has the characteristic of always following the object being pledged as collateral inthe hands of whoever the object is in (droid de suite). Then, for the initial credit agreement which has beenrestructured through an addendum, it remains in effect as a binding condition between legal subjects in their legalrelationship and the addendum cannot be separated from the original credit agreement.Keywords: Impact, Restructuring, Credit Agreement, Mortgage Rights, Problematic Credit

Investigation of Bad Credit in P2P Lending Based on Personal Character in Indonesia

This research examines Indonesian P2P lending and bad loan management by analyzing borrower characteristics. The large value of problematic loans is a key signal for this investigation. The Big Five Personality Approach is used to survey P2P lending users. This study solely examines if the Big Five personality traits affect evaluation. On March 5–18, 2023, 17 P2P lending sites gathered data from 197 respondents for two weeks. Data validation continued until 11 respondents were pruned. The remaining 186 respondents' data was evaluated using SPSS. The management process yielded two hypothesis tests, the T-test and the F-test, which showed that the Big Five personality significantly affects present assessment activities. F-Test findings show the Big Five Personalities have a big impact concurrently. These two factors suggest that the Big Five Personalities may evaluate decision support systems for borrower recommendations.

Kajian Strategi Restrukturisasi Kredit Usaha Rakyat dalam Mengatasi Loan At Risk (LAR)

The problem that is often faced by the banking world in general is the problem of problematic credit. The same thing happened to Bank BRI. The consequences of these problematic loans can increase the NPL level which will impact the bank's health if not handled quickly and appropriately. So in this case the bank uses credit restructuring by referring to the Loan At Risk (LAR) financial ratio as a restructuring strategy. The same thing happened to Bank BRI, where the factor that led to the implementation of the restructuring policy was because in 2019 the Covid-19 pandemic occurred which resulted in many customers being affected and unable to repay their credit on time. The consequences of these problematic loans can increase the NPL level which will impact the bank's health if not handled quickly and appropriately. So in this case the bank uses credit restructuring as a strategy to reduce non-performing loans. This type of research is qualitative descriptive analysis. Research data was collected using interviews, observation, documentation, and questionnaires. The benefits of research can be used to develop knowledge in the field of financial institutions, especially regarding the implementation of restructuring strategies in overcoming Loan At Risk (LAR). From the implementation of credit restructuring carried out by BRI Bank, it can be concluded that the implementation of credit restructuring as a strategy for reducing problem loans has been carried out effectively in accordance with the procedures and policies that have been determined by the bank's internal and banking regulations. This effectiveness can be proven by the decreasing percentage of LAR levels every year.

Sustainable banking practices in Southern Africa

Orientation: Problematic loans expose commercial banks to great risk. South African and Namibian banks are highly regulated and require a higher capital adequacy ratio to shield the banking system from default risk. However, such intense regulation distorts the cost of capital and denies equal access to many previously disadvantaged members of society previously excluded from banking services. Highly regulated banking therefore holds major implications for the country’s growth prospects.Research purpose: This theoretical paper examines the South African and Namibian banking systems, to understand the challenges in managing risk and creating greater stakeholder value. As the forerunner to an empirical investigation, it intended to understand scholarly views on sustainable banking practices and financial exclusion.Motivation for the study: Borrowing from the fields of strategic management and business psychology, this study unpacks the human role in executing sustainable banking practices.Research design, approach and method: Theoretical, abstract research, analysing recent research, was conducted to uncover current banking research trends in South Africa and Namibia.Main findings: Value creation, rather than compliance, should be prioritised, to achieve sustainable lending, risk management and inclusivity.Practical/managerial implications: Policy makers in the South African and Namibian financial services sectors may benefit from this theoretical research and use it to improve their ability to strike a balance between sustainable banking, increasing access to banking for the previously unbanked, and meeting regulator needs.Contribution/value-add: This study makes a theoretical contribution to the body of knowledge on sustainable banking, which is an emerging field globally.

Bail-in and bank funding costs

We evaluate the impact of the bail-in, the new resolution policy adopted in 2016 within the Bank Recovery and Resolution Directive, on the cost of funding for EU banks. We first estimate the change in spreads of credit default swaps on subordinated and senior bonds issued by EU banks through an event study around the period when the policy became effective. We find that risk premia of junior bail-in-able bonds raised more compared to senior bonds. The results, however, point to a great heterogeneity in the impact of the policy, both for individual banks and across countries, while a simple theoretical model suggests possible sources of this heterogeneity. We therefore regressed the abnormal values derived from the event study on bank characteristics and macroeconomic factors. We uncovered several factors explaining the larger cost of funds for some of the EU banks after the implementation of bail-in: banks with more problematic loans, less capitalized, and headquartered in countries with a higher risk premium on sovereign debt have experienced a larger rise in their funding costs when issuing subordinated bonds. Overall, our paper provides evidence that the adoption of bail-in has prompted a more accurate evaluation of bank risk by junior creditors, leading to an increase in the cost of funds for banks.

Determinants Of Non-Performing Loans In Indonesia

Non-performing loans (NPLs) are a typical sign of stress testing from financial institutions and may be used to measure the financial system's health. The critical criterion for achieving financial system stability is macroeconomic stability. Instability in the financial system (financial crisis) impairs a bank's liquidity and might lead to more problematic loans, impacting other industries. The association between NPL and numerous macroeconomic variables, including Interest Rate Spreads, Inflation, Percentage of Open Disruption, and Amount of Foreign Exchange Reserves in Indonesia, is examined in this paper. The study used the Vector Error Correction Model (VECM) method to estimate data for a sample period of 2000 to 2020. In the long run, inflation factors, the number of open jobless, and the number of foreign exchange reserves all substantially impacted the ratio of non-performing loans, according to the findings. However, no variables influenced the percentage of non-performing loans in the short run.

Banks’ credit risk, systematic determinants and specific factors: recent evidence from emerging markets

Non-performing loans (NPLs, henceforth) represent the main challenge that jeopardizes the steadiness of the banking sector. The purpose of this study is to explore the main determinants of banks' non-performing loans in emerging markets. To better understand the hidden aspects of these determinants, the current research employs a panel approach and dynamic data estimates through Generalized Methods of Moments (GMM) using data of 53 banks listed in five Middle East and North African (MENA) emerging markets between 2000 and 2019. This study documents that GDP growth, unemployment, bank capitalization, bank performance, bank operating inefficiency, bank ownership concentration, inflation, sovereign debt and bank size are the main determinants of NPLs, whereas, loan growth, bank diversification and interbank competition were found to have an insignificant impact on NPLs. This analysis is motivated by the recent economic changes surrounding the financial systems in emerging countries with the aim to provide new evidence and insights. The results show that non-performing loans can be explained mainly by macroeconomic variables and bank-specific factors with interesting differences in their quantitative impacts. This study has substantial theoretical and practical contributions. It shows strong evidence on the leading indicators of future problematic loans. The identification of these factors would help regulators address appropriate interventions, design ample credit policies and adopt adjusted prudential regulations. Further, it empowers the regulatory authorities with an in-depth understanding of credit risk determinants, allowing them to place emphasis on risk management systems and procedures that minimize borrowers' default in order to avert future financial instability. Our findings underscore the necessity of closely monitoring bank-specific factors along with reinforcing country level mechanisms to reduce banks’ credit risk.

Concept and Model of Insolvent Credit Settlement in Banking Legal System According the Demand for Efficiency in the Business World

The concept of non-performing loan settlement as stipulated in the banking legal system in Indonesia, especially settlement through litigation in court, is not in accordance with the demands of efficiency in the business world and the dynamics of national economic development. The concept of bad credit settlement based on German banking law reflects an indication of the level of efficiency in accordance with the demands of the business world. The German Insolvency Act (GIA) Bankruptcy Law provides a model how to efficiently solve problematic loans for the exemption of debtors' debts. The application of good (wohlverhaltensperiode), will free a person from his debt to the benefit others, and this will bring the debtor back on the path of right financial behavior is potentially more beneficial than offering some alternatives to creditors, debtors and the public. The comparison of concept of the bad credit settlement system between Indonesian banking law and German banking law is useful. The settlement of bad credit with Indonesian banking law is very inefficient, requires a long time, labor and costly (often requiring more than 1 decade. In comparison, the German banking system concept can reflect an indication of a high level of efficiency according to the demands of the business world, both in terms of energy efficiency, time and low costs. We hypothesize that the non-performing loan settlement model can be carried out by increasing the function and authority of the State Wealth and Auction Service Office (KPKNL) as the State Representative in arranging and coordinating restructuration process in both management and managerial at the time of non-performing loans. Doing so will be more efficient and effective and gives legal certainty in protecting the privelegesof banks as separatist creditors to get a share.

Settlement of Problematic Loans in the Unit Pengelola Kegiatan (UPK) of Pidie District did Sharia

This research aims to determine the cause of problematic credit in UPK Pidie district and problematic credit settlement procedures in UPK Pidie District as well as the settlement of problematic credit on UPK in Pidie district according to Sharia. Results of the study showed that the main factor of the cause of problematic credit in the UPK of Pidie District is because of business and business results that do not match the expectations plus more household needs that are increasingly increasing the day, earnings that do not meet the needs. Also and credit given is not fully used for capital, there are groups using loans for household needs. The problematic credit settlement procedure for UPK Pidie District is by conducting a field review, conducting coaching many times by continuing to spur the group to pay by the next set time with restructuring efforts. The settlement of problematic credit in the UPK Pidie District is appropriate because the UPK does not attract the angling but always takes a family path with the affected group members.

Settlement of Problematic Loans in the Unit Pengelola Kegiatan (UPK) of Pidie District did Sharia

This research aims to determine the cause of problematic credit in UPK Pidie district and problematic credit settlement procedures in UPK Pidie District as well as the settlement of problematic credit on UPK in Pidie district according to Sharia. Results of the study showed that the main factor of the cause of problematic credit in the UPK of Pidie District is because of business and business results that do not match the expectations plus more household needs that are increasingly increasing the day, earnings that do not meet the needs. Also and credit given is not fully used for capital, there are groups using loans for household needs. The problematic credit settlement procedure for UPK Pidie District is by conducting a field review, conducting coaching many times by continuing to spur the group to pay by the next set time with restructuring efforts. The settlement of problematic credit in the UPK Pidie District is appropriate because the UPK does not attract the angling but always takes a family path with the affected group members.

Pengaruh Dana Pihak Ketiga dan Kredit Bermasalah terhadap Penyaluran Kredit pada Lembaga Perkreditan Desa (LPD) Sekecamatan Kediri Kabupaten Tabanan

The research entitled Effect of Third Party Funds and Problematic Loans on Credit Distribution at Village Credit Institutions (LPD) in Kediri District, Tabanan Regency. The formulation of the problem is: How to Influence Third Party Funds and Troubled Loans simultaneously and partially on Credit Distribution LPD in the Kediri District. The Research Objective is to find out how the influence of Third Party Funds and Problematic Loans Against Credit Distribution In the LPD of Kediri District. Data analysis is done by dummy variables and hypothesis testing with multiple linear regression analysis methods. The results showed that partially Third Party Funds had a positive and significant effect on Credit Distribution while Problematic Loans had a negative and not significant effect on Credit Distribution. Simultaneously Third Party Funds and Troubled Loans significantly influence Credit Distribution at the Kediri District LPD.

The Place of Non-performing Loans in the Turkish Banking Sector

In the banking sector, the size of loans and their problems are of great importance in all periods. The share of nonperforming loans in total loans has a strong influence on the asset quality of banks, the extent to which the real sector impact is affected, the extent to which it affects profitability and how it contributes to capital adequacy.The higher the rate of problematic loans for a bank, the lower the risk and the lower the risk. Therefore, a credit policy in order to reduce the share of troubled loan rates in total loans within the Turkish banking sector will be a factor to increase their financial strength.In this study, the definition and scope of empirically problematic loans will be discussed in detail. Then, the effects of the non-performing loans on the banking sector will be presented. These headings include the effects of nonperforming loans on capital adequacy, their effects on the real sector, their impact on asset quality and their impact on profitability. It is seen that the banks with high rate of loans have disrupted the asset quality due to the inability to collect the loans, and it is seen that they are directed towards entering into a negative thought in the banks against the real sector. The height of the rate also negatively affects the capital adequacy of Turkish banks and their profitability.

Within-Bank Spillovers of Real Estate Shocks

By considering banks as portfolios of assets in different locations, we study how real estate shocks are transmitted across bank’s business areas while controlling for local demand shocks and bank location–specific factors. Affected banks substantially alter their loan portfolios: we find evidence of real estate price declines affecting both real estate and non-real estate types of lending. Banks also roll over and fail to liquidate problematic loans, while accumulating more non-performing loans. These results provide evidence of internal contagion of real estate shocks within banks.

The spillover effect of enforcement actions on bank risk-taking

Abstract Enforcement actions (sanctions) aim to penalize guilty companies and provide examples to other companies that bad behavior will be penalized. A handful of papers analyze the consequences of sanctions in banking for sanctioned companies, while no papers have investigated the spillover effects on non-sanctioned banks. Focusing on credit-related sanctions, we show the existence of a spillover effect: non-sanctioned banks behave similar to sanctioned banks, depending on their degree of similarity, offloading problematic loans and reducing their lending activity.

NPLs resolution regimes: Challenges for regulatory authorities

Banks around the globe are struggling with high levels of non-performing loans (NPLs). The crisis and subsequent recession have left businesses and households in many countries with over-indebtedness, which depresses consumption and investment. Significant banking sector resources are absorbed by legacy assets that make banks more reluctant to extend credit and support new viable investment projects. NPLs resolution is needed in order for banks to resume lending and the issues should be addressed with some form of central intervention, that is, government assistance. Two approaches are available: the creation of a bad bank, which aggregates all NPLs; or the creation of internal work-out units within the banks for specialised management of problematic loans. The optimal solution is not unique and depends on the economic and political environment, the institutional framework as well as the intensity of the problem. Whatever solution is chosen, however, it poses specific challenges for regulatory authorities both from a macroprudential and a microprudential perspective. From a macroprudential perspective the NPLs resolution policy, the NPLs persistence and toxicity, the adverse feedback loop in macrofinancial linkages, the form of intervention and private debt overhang are considered. From a microprudential perspective, the supervisory protection layers, the data adequacy for credit assessment as well as challenges from the new business model, are of interest. Finally, the theoretical analysis is supported by international evidences.

The Unintended Consequences of Bank Stress Tests

Stress tests are assessments conducted by regulators to determine whether banks have sufficient capital buffers to withstand severe recessions. Unlike ordinary bank examinations, stress tests involve forward-looking scenarios and their results are publicly disclosed. This paper is the first study to show the consequences of bank stress tests. My estimates indicate that there is a negative causal impact of capital adequacy requirements on managerial decisions in the U.S. banking system. Managers make real decisions regarding restructuring problematic loans or removing them completely from their books. Stress-tested banks reduce net loan charge-offs and keep problematic loans on their books to a greater extent than banks in a non-tested group to meet the capital ratio requirements. Managers increase the level of non-performing loans in the aftermath of stress tests announcement. Stress-tested banks with greater exposure to the housing market change the classification of loan losses to a greater extent than other banks. The study’s results remain robust using mid-sized banks that have been subject to the latest rounds of stress tests.

Pipeline Risk in Leveraged Loan Syndication

Leveraged term loans are typically arranged by banks but distributed to institutional investors. Using novel data, we find that to elicit investors' willingness to pay, arrangers expose themselves to pipeline risk: They have to retain larger shares when investors are willing to pay less than expected. We argue that the retention of such problematic loans creates a debt overhang problem. Consistent with this, we find that the materialization of pipeline risk for an arranger reduces its subsequent arranging and lending activity. Aggregate time series exhibit a similar pattern, which suggests that the informational friction we identify could amplify the credit cycle.

From the Perspectives of Macroeconomic Factors: The Past and Future of Problematic Loans in Albania

There are a lot of risks that influence the ongoing performance in banking system and especially commercial banks, but, the credit risk is one of the highest one. The most important factor that indicates this performance is the level of nonperforming loans. It highly affects the bank stability each year. So, for this reason it is very important to manage them in the most effective way possible. For being able to manage these loans we must understand and know what are the main factors that indicate them are. There are different factors, such as macroeconomic and banking factors. The purpose of this paper is to analyze these factors in order to maintain the bank stability in the right way. This analyze is done for the Albanian banking system during the years 2000-2012. Factors included are the GDP rate, Real Interest Rate, Inflation Rate, Money Supply Growth Rate, and Unemployment Rate. The relation between these factors and NPLs show us the ongoing growth of the NPLs and how are affected. DOI: 10.5901/mjss.2015.v4n1p35

How Did US Banks React to Capital Losses Induced by Real Estate Prices?

By considering banks as portfolios of assets in different locations, we study the transmission of negative real estate shocks across bank’s business areas and geographical locations while controlling for local demand shocks and bank location–specific factors. Affected banks recognize capital losses and cut lending across the board indicating contagion across business lines and locations. They also roll over and fail to liquidate problematic loans, in addition to reducing their operational costs and depleting their liquidity. These results provide evidence of bank balance sheet transmission and amplification of real estate shocks.

Non-performing loans and systemic risk: Comparative analysis of Serbia and countries in transition CESEE

This paper presents the results of the research on the impact of non-performing loans to the systemic risk in the domestic banking system and a comparison with other countries in transition, as well as on certain EU countries. It is important to mention that the extreme bank-centricity caused the extension of the analysis to the entire financial sector of Serbia. Therefore, macroeconomic and macro-financial component of systemic risk were separated. In order to more precisely determine the main effects of non-performing loans in the propagation of systemic risk, the authors have created and used two new synthetic indicators in the research. The first is the macroeconomic contagion with non-performing loans (problematic loans expressed as a percentage of GDP), and the second is the infection of financial sector with nonperforming loans (the proportional share of these loans in the assets of the financial sector). Analysis of the period just before and during the current financial crisis and the recession (2007-2012) showed that the NPLs (nonperforming loans) are the main generator of systemic risk in the financial and real sectors of Serbia. In addition, the survey results show that the applied synthetic indicators measure total system risk and its basic components more accurately then the analytical, which have only been in use until now. Comparative analysis showed similar results, not only in the countries in transition, but also in developed ones. The results of this study provide guidance and represent an important input for economic policymakers, because the systemic risk is the greatest immediate threat to economic prosperity and financial stability of each country.