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Do NPL portfolio sales help reduce banks’ financing costs?

Author

Listed:
  • Manz, Florian
  • Kiesel, Florian
  • Schiereck, Dirk

Abstract

We examine financing cost implications of non-performing loan (NPL) divestitures in the European banking industry. Based on a uniquely large transaction database covering 180 NPL sales, we analyze whether selling banks are able to reduce their financing costs measured by CDS spread changes. We do not find a significant tightening of CDS spreads around NPL divestitures, indicating that European banks are not able to reduce their financing costs by NPL portfolio sales.

Suggested Citation

  • Manz, Florian & Kiesel, Florian & Schiereck, Dirk, 2019. "Do NPL portfolio sales help reduce banks’ financing costs?," Economics Letters, Elsevier, vol. 182(C), pages 93-97.
    • Handle: RePEc:eee:ecolet:v:182:y:2019:i:c:p:93-97
    DOI: 10.1016/j.econlet.2019.06.009
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    More about this item

    Keywords

    Non-performing loans; Banks; Credit default swaps; Restructuring; Bad management;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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