scholarly journals Using Nonperforming Loan Ratios to Compute Loan Default Rates With Evidence From European Banking Sectors

2016 ◽  
Vol 1 (1) ◽  
pp. 47-65 ◽  
Author(s):  
Dobromił Serwa
Keyword(s):  
Loan Default ◽  
Macroeconomic Factors ◽  
Additional Information ◽  
Nonperforming Loans ◽  
Loan Portfolios ◽  
Default Rates ◽  
Maturity Structure ◽  
Loan Supply ◽  
European Banking ◽  
Loan Quality

This research is the first attempt to calibrate default rates of loan portfolios using raw data on nonperforming loans and some additional information on the maturity structure of the loan portfolios. We applied a simple model of loan quality, controlling for loan maturities and dynamics of loan supply. Results for nine national aggregate indices of nonperforming housing loans in the Czech Republic, Greece, Ireland, Hungary, Latvia, Poland, Portugal, Romania, and Spain revealed strong differences in the dynamics of calibrated default probabilities between countries. Calibrated default rates were correlated with macroeconomic factors, but the linkages depended on the markets investigated.

scholarly journals The Vanishing Interest Income of Chinese Banks

2021 ◽  
pp. 1-20
Author(s):  
Karlo Kauko
Keyword(s):  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Bank Loan ◽  
Frontier Analysis ◽  
Nonperforming Loans ◽  
Loan Portfolios ◽  
Interest Income ◽  
Chinese Banks ◽  
Loan Quality

Abstract Chinese banks likely have more nonperforming loans (NPLs) than officially reported. Banks’ NPLs often deviate from Benford's law. As hidden NPLs earn no interest income, loan quality problems may erode the gross interest income of banks. Using stochastic frontier analysis, we estimate the interest income of a hypothetical profit-maximizing Chinese bank with no credit quality problems. Taking the deviation of actual interest income from the calculated efficient income, we then attempt to reveal the amount of hidden NPLs in Chinese banks. Our results uncover a substantial weakening in the quality of Chinese bank loan portfolios in 2016.

Same Story, Different Place?

2018 ◽  
Author(s):  
Viral V. Acharya ◽  
Tim Eisert ◽  
Christian Eufinger ◽  
Christian Hirsch
Keyword(s):  
Banking Sector ◽  
Debt Crisis ◽  
Banking System ◽  
Policy Implications ◽  
Balance Sheets ◽  
System P ◽  
Loan Supply ◽  
European Banking ◽  
European Debt Crisis

This chapter compares the recapitalizations of the Japanese banking sector in the 1990s with those in the ongoing European debt crisis. The analysis points to four main policy implications. First, recapitalizing banks by insuring or purchasing troubled assets alone is not likely to solve the problem of banks’ weak capitalization, as this measure is not able to adjust the extent of the recapitalization to the banks’ specific needs. Second, the amount of the recapitalization should be based on actual capital shortages and not risk-weighted assets to avoid banks decreasing their loan supply. Third, banks should face restrictions regarding the amount of dividends they are allowed to pay out. Finally, banks must be induced to clean up their balance sheets and reduce the amount of bad (non-performing) loans to rebuild confidence in the European banking system.

scholarly journals One-factor model for default rates by loan type

Bankarstvo ◽  
2021 ◽  
Vol 50 (2) ◽  
pp. 88-100
Author(s):  
Miloš Božović
Keyword(s):  
Factor Model ◽  
Risk Measures ◽  
Loan Default ◽  
Macroeconomic Risk ◽  
Default Rates ◽  
Proposed Model ◽  
Default Rate ◽  
Systemic Component ◽  
Very High

This paper investigates the link between default rates by loan types and the systemic credit risk component. This link is described by a linear model that combines systemic and idiosyncratic contributions. The systemic component is a latent factor that depends directly on the aggregate loan default rate, while the idiosyncratic component drives specific variations of default rates across loan types. By transforming observable risk measures, the model can be econometrically represented as a mixed-effects model, where the systemic and idiosyncratic components represent, respectively, the slope and the intercept that are specific for each loan type individually. The proposed model is illustrated on a panel of defaulted loans of the Association of Serbian Banks. The obtained results show the model's very high power in explaining average default rates for all loan types. Thus, the aggregate default rate plays the role of a unique systemic component that mimics the influence of fundamental macroeconomic risk factors easily, without the necessity to model this relationship explicitly.

scholarly journals Bank Regulation and Level of Non performing Loans in Commercial Banks in Nakuru County Kenya

2020 ◽  
Vol 2 (2) ◽  
pp. 59-76
Author(s):  
Geoffrey Indeje Muhanji ◽  
Joseph Theuri
Keyword(s):  
Central Bank ◽  
Commercial Banks ◽  
Bank Regulation ◽  
Capital Adequacy ◽  
Liquidity Management ◽  
Macroeconomic Factors ◽  
Nonperforming Loans ◽  
Management Efficiency ◽  
Asset Quality ◽  
The Relationship

The study sought to determine the effect of bank regulation and level of nonperforming loans in commercial banks in Nakuru County Kenya. The specific objectives of the study were to explore the effect of capital adequacy on the level of nonperforming loans in commercial banks in Nakuru County Kenya, to find out the effect of asset quality on the level of nonperforming loans in commercial banks in Nakuru County Kenya, to evaluate the effect of liquidity management on the level of nonperforming loans in commercial banks in Nakuru County Kenya, to examine the effect of management efficiency on the level of nonperforming loans in commercial banks in Nakuru County Kenya and to determine the moderating effect of macroeconomic factors on the relationship between bank regulation and level of nonperforming loans. The literature review focused on portfolio theory of investment, capital asset pricing theory and the capital buffer theory of capital adequacy. The primary data was collected using structured questionnaires and secondary data was collected from the banking survey 2017 and central bank of Kenya annual supervisory reports. The study employed multiple linear regression analysis and the finding revealed that there exist a negative and statistically insignificant relationship between capital adequacy and non-performing loans. It was also observed that there exist a negative and statistically insignificant relationship between liquidity management and non-performing loans. On the other hand, there exist a positive and statistically significant relationship between asset quality and non-performing loans. Similarly, there exist a positive and statistically insignificant relationship between management efficiency and non-performing loans. Finally, the findings indicated that macroeconomic factors have moderating effect on the relationship between bank regulations and non-performing loans in commercial banks in Nakuru County. It was concluded that asset quality positively influences non-performing loans while management efficiency influence positively the non-performing loans. Similarly, liquidity management exerts a negative influence on non-performing loans. Finally, capital adequacy influence negatively on non-performing loans. The study recommends that Central Bank of Kenya should regularly access lending behavior to ensure compliance with banking regulations to avoid increasing incidences of non-performing loans. In addition, Central Bank of Kenya should closely monitor banks with deteriorating asset quality. Further, Central Bank of Kenya should strictly monitor the economic sector and ensure that banks provide adequate provisions for loans to mitigate risks of default. Furthermore, banks should maintain a good balance on deposits and lending out loans and adhere to regulators decisions about monetary policies. Finally, banks should increase the operational efficiency of operation weakness and improve corporate governance on the sanction of loans and Central Bank of Kenya should focus on managerial performance in order to detect banks with potential increases in non-performing loans.

Social Capital’s Impact on College Graduation Rates, Debt, and Student Loan Defaults

2020 ◽  
pp. 152102512091887
Author(s):  
Steve Joanis ◽  
James Burnley ◽  
J. D. Mohundro
Keyword(s):  
Social Capital ◽  
Graduation Rates ◽  
Student Loan ◽  
Theory And Practice ◽  
College Graduation ◽  
Student Debt ◽  
Loan Default ◽  
College Graduation Rates ◽  
Default Rates ◽  
Debt Levels

This study extends the literature on education economics and student retention by examining social capital as a predictor of college graduation rates, student debt levels, and student loan default rates. Coleman’s social capital theory is employed to understand how social influences can impact students through external social support (i.e., social capital). The study uses school-level data from the U.S. Department of Education’s Integrated Postsecondary Education Data System and two social capital measures. Results suggest that social capital, at both the state and the community level, significantly influences graduation rates, student debt levels, and loan default rates. Implications for theory and practice are discussed.

scholarly journals Corporate stress and bank nonperforming loans: Evidence from Pakistan

2021 ◽  
Vol 2021 (1327) ◽  
pp. 1-32
Author(s):  
Ali M. Choudhary ◽  
◽  
Anil K. Jain ◽  
◽  
Keyword(s):  
Theoretical Prediction ◽  
Registry Data ◽  
Nonperforming Loans ◽  
Suggestive Evidence ◽  
Default Rates ◽  
Loan Terms

Using detailed administrative Pakistani credit registry data, we show that banks with low leverage ratios are both significantly slower and less likely to recognize a loan as nonperforming than other banks that lend to the same firm. Moreover, we find suggestive evidence that this lack of recognition impedes loan curing, with banks with low leverage ratios reporting significantly higher final default rates than other banks for the same borrower (even after controlling for differences in loan terms). Our empirical findings are consistent with the theoretical prediction that classifying a nonperforming loan is more expensive for banks with less capital.

scholarly journals P2P Lending platforms in Malaysia: the awareness among young adults

F1000Research ◽  
2021 ◽  
Vol 10 ◽  
pp. 1096
Author(s):  
Lan Thi Phuong Nguyen ◽  
Saravanan Muthaiyah ◽  
Malick Ousmane Sy
Keyword(s):  
Young Adults ◽  
Pilot Study ◽  
Undergraduate Students ◽  
Financial Literacy ◽  
Online Questionnaire ◽  
Loan Default ◽  
Default Rates ◽  
P2p Lending ◽  
High Level ◽  
Shed Light

Background - Since 2016, the Securities Commission (SC) in Malaysia has given licenses to only eleven P2P lending platforms. Such lending platforms are expected to disrupt the lending services of traditional lenders in the coming years. However, being still in their infant stages, it is essential to know the extent to which such platforms are made known to potential investors out there. This study examines the extent to which young adults are aware of Malaysia's eleven P2P lending platforms.    Methods - A sample of 65 undergraduate students majoring in finance and accounting was used for this pilot study. An online questionnaire was designed with three main parts: demographic, financial literacy, and P2P lending awareness.   Results - Findings show that more than half of respondents in the sample are not aware of P2P lending platforms in Malaysia.  Most of the respondents are financially literate to certain degrees. Those aware of their presence underestimated the potentially high level of their default rates and misunderstood that investor would be fully protected by such platforms when a loan default.   Conclusions -The study's findings have shed light on the current awareness of P2P lending platforms among Malaysian young adults, potential investors of such platforms in the coming years.

Nonperforming loans and bank profitability: evidence from an emerging market

2016 ◽  
Vol 7 (4) ◽  
pp. 462-481 ◽  
Author(s):  
Esther Laryea ◽  
Matthew Ntow-Gyamfi ◽  
Angela Azumah Alu
Keyword(s):  
Banking Sector ◽  
Emerging Market ◽  
Bank Profitability ◽  
Macroeconomic Factors ◽  
Policy Makers ◽  
Content Type ◽  
Nonperforming Loans ◽  
Panel Model ◽  
Macroeconomic Determinants ◽  
The Impact

Purpose The purpose of this paper is to investigate the bank-specific and macroeconomic determinants of nonperforming loans (NPLs) as well as the impact of NPLs on bank profitability. Design/methodology/approach Using a sample of 22 Ghanaian banks over the period 2005-2010, the study employs a fixed effect panel model in estimating three different empirical models. Findings The study finds new evidence of bank-specific factors as well as macroeconomic factors determining NPLs. Inflation and industry concentration are not significant in determining NPLs, although both are positively related to NPLs. Practical implications The findings of this study have important implications for policy makers and bank managers. Originality/value The paper offers significant value in shaping and improving the banking sector of emerging markets.

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