engleski

Determinants of non-performing loans – evidence from Southeastern banking systems

In recent years banking systems in Southeastern Europe have experienced high growth of non-performing loans. The deterioration of credit portfolio quality however could, at least, affect bank overall performance but also jeopardize the bank capital and lead to the insolvency. Additionally, in case of increasing non-performing loans in considerable part of the banking system, financial stability of the whole sector is threatened. Moreover, credit rationing related to unwillingness of banks to accept additional credit risk produce adverse effects on the real economy. Thus, understanding the factors of non-performing loans is valuable for banks as well as for regulators. Motivated by the fact of the growth of non-performing loans as well as adverse consequences of credit risk for financial stability of both individual banks and banking system as well as for economic activity, this paper empirically investigates the determinants of non-performing loans in Southeastern European banking systems. The analysis is based on sample of 69 banks in 10 countries in the period from 2003 to 2010 and Generalized Method of Moments estimator for dynamic panel models. The research encompasses both macroeconomic and bank-specific factors. The results show that lower economic growth, higher inflation and higher interest rate are associated with higher non-performing loans. Additionally, the credit risk is affected by bank-specific variables such as bank size, performance (ROA) and solvency.

Non-performing loans; macroeconomic determinants; bank-specific factors; Southeastern European banking systems; dynamic panel analysis

nije evidentirano