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Determinants of Differentiation of Cost of Risk (CoR) among Polish Banks during COVID-19 Pandemic

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  • Zbigniew Korzeb

    (Department of Management, Economy and Finance, Bialystok University of Technology, 15-351 Białystok, Poland)

  • Paweł Niedziółka

    (Banking Institute, Warsaw School of Economics, 02-554 Warszawa, Poland)

Abstract

The aim of the paper is to assess the evolution of the cost of credit risk (CoR) of Polish banks as a result of the COVID-19 pandemic in the first three quarters of 2020 as well as its microeconomic determinants. We analysed the structural diversity of the sample of the 13 largest Polish commercial banks in terms of the evolution of their CoR. For this purpose, a diagraphic method of Jan Czekanowski was used. It allowed us to distinguish two groups of banks displaying features characteristic of multi-object structures and three groups consisting of individual banks characterized by atypical CoR developments, significantly different from the structures of objects classified to the first and second groups. In the second part of the research, in order to identify the determinants of the observed trends, a multiple regression model was used in which the explanatory variable was the dynamics of CoR in the first three quarters of 2020. The parameters of return on capital (ROE) at the end of 2019, Non-Performing Loans (NPLs) at the end of 2019 and the dynamics of write-offs in the period 2017–2019 proved to be important explanatory variables.

Suggested Citation

  • Zbigniew Korzeb & Paweł Niedziółka, 2021. "Determinants of Differentiation of Cost of Risk (CoR) among Polish Banks during COVID-19 Pandemic," JRFM, MDPI, vol. 14(3), pages 1-12, March.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:3:p:110-:d:512488
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    2. Pejman Peykani & Mostafa Sargolzaei & Mohammad Hashem Botshekan & Camelia Oprean-Stan & Amir Takaloo, 2023. "Optimization of Asset and Liability Management of Banks with Minimum Possible Changes," Mathematics, MDPI, vol. 11(12), pages 1-24, June.
    3. Emil Ślązak & Magdalena Skwarzec, 2022. "The effects of IFRS 9 valuation model on cost of risk in commercial banks – the impact of COVID-19," Bank i Kredyt, Narodowy Bank Polski, vol. 53(1), pages 47-78.

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