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Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective

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Journal Title: Management & Marketing. Challenges for the Knowledge Society
Authors and Corporations: Tatarici, Luminita Roxana, Kubinschi, Matei Nicolae, Barnea, Dinu
In: Management & Marketing. Challenges for the Knowledge Society, 15, 2020, 4, p. 621-642
Type of Resource: E-Article
Language: English
published:
Walter de Gruyter GmbH
Subjects:
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rft.atitle Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective
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rft.jtitle Management & Marketing. Challenges for the Knowledge Society
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rft.pub Walter de Gruyter GmbH
rft.date 2020-12-01
x.date 2020-12-01T00:00:00Z
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abstract <jats:title>Abstract</jats:title> <jats:p>This article investigates the determinants of non-performing loans for a panel of EEC countries and the implications for the real economy, covering the period 2005-2017. Among the determinants, the paper proposes macroeconomic factors, banking sector variables, and cost and governance indicators. Additionally, the paper explores the extensive use of macroprudential measures in these countries. Using a panel with fixed effects and a dynamic GMM estimator, the results support the existing findings that adverse macroeconomic developments are generally associated with higher non-performing loans, while increases in NPLs have a rather transitory effect on the real economy and credit. NPL ratios increase if macroeconomic conditions deteriorate, while an improvement in the government effectiveness reduces them. A more profitable and better capitalized banking sector generally leads to lower NPLs. Moreover, countries with higher past credit growth rates witnessed higher NPLs in the periods that followed. These results support the use of macroprudential measures for increasing the resilience of borrowers, such as limits on the indebtedness level (such as debt service-to-income, DSTI or loan-to-value, LTV caps), as tools to temper the credit cycle.</jats:p>
authors Array ( [rft.aulast] => Tatarici [rft.aufirst] => Luminita Roxana )
Array ( [rft.aulast] => Kubinschi [rft.aufirst] => Matei Nicolae )
Array ( [rft.aulast] => Barnea [rft.aufirst] => Dinu )
doi 10.2478/mmcks-2020-0036
languages eng
url http://dx.doi.org/10.2478/mmcks-2020-0036
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author Tatarici, Luminita Roxana, Kubinschi, Matei Nicolae, Barnea, Dinu
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description <jats:title>Abstract</jats:title> <jats:p>This article investigates the determinants of non-performing loans for a panel of EEC countries and the implications for the real economy, covering the period 2005-2017. Among the determinants, the paper proposes macroeconomic factors, banking sector variables, and cost and governance indicators. Additionally, the paper explores the extensive use of macroprudential measures in these countries. Using a panel with fixed effects and a dynamic GMM estimator, the results support the existing findings that adverse macroeconomic developments are generally associated with higher non-performing loans, while increases in NPLs have a rather transitory effect on the real economy and credit. NPL ratios increase if macroeconomic conditions deteriorate, while an improvement in the government effectiveness reduces them. A more profitable and better capitalized banking sector generally leads to lower NPLs. Moreover, countries with higher past credit growth rates witnessed higher NPLs in the periods that followed. These results support the use of macroprudential measures for increasing the resilience of borrowers, such as limits on the indebtedness level (such as debt service-to-income, DSTI or loan-to-value, LTV caps), as tools to temper the credit cycle.</jats:p>
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spelling Tatarici, Luminita Roxana Kubinschi, Matei Nicolae Barnea, Dinu 2069-8887 Walter de Gruyter GmbH General Business, Management and Accounting http://dx.doi.org/10.2478/mmcks-2020-0036 <jats:title>Abstract</jats:title> <jats:p>This article investigates the determinants of non-performing loans for a panel of EEC countries and the implications for the real economy, covering the period 2005-2017. Among the determinants, the paper proposes macroeconomic factors, banking sector variables, and cost and governance indicators. Additionally, the paper explores the extensive use of macroprudential measures in these countries. Using a panel with fixed effects and a dynamic GMM estimator, the results support the existing findings that adverse macroeconomic developments are generally associated with higher non-performing loans, while increases in NPLs have a rather transitory effect on the real economy and credit. NPL ratios increase if macroeconomic conditions deteriorate, while an improvement in the government effectiveness reduces them. A more profitable and better capitalized banking sector generally leads to lower NPLs. Moreover, countries with higher past credit growth rates witnessed higher NPLs in the periods that followed. These results support the use of macroprudential measures for increasing the resilience of borrowers, such as limits on the indebtedness level (such as debt service-to-income, DSTI or loan-to-value, LTV caps), as tools to temper the credit cycle.</jats:p> Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective Management & Marketing. Challenges for the Knowledge Society
spellingShingle Tatarici, Luminita Roxana, Kubinschi, Matei Nicolae, Barnea, Dinu, Management & Marketing. Challenges for the Knowledge Society, Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective, General Business, Management and Accounting
title Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective
title_full Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective
title_fullStr Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective
title_full_unstemmed Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective
title_short Determinants of Non-Performing Loans for the EEC Region. A Financial Stability Perspective
title_sort determinants of non-performing loans for the eec region. a financial stability perspective
topic General Business, Management and Accounting
url http://dx.doi.org/10.2478/mmcks-2020-0036