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Determinants of Non Performing Loans: Case of US Banking Sector

Author

Listed:
  • Irum Saba

    (INCEIF, Malaysia)

  • Rehana Kouser

    (Department of Commerce Bahauddin Zakariya University, Multan-Pakistan)

  • Muhammad Azeem

    (MBA (Finance) Scholar, Air University, Multan-Pakistan)

Abstract

Non Performing Loan Rate is the most important issue for banks to survive. There are lots of factors responsible for this ratio. Some of them belong to firm level issues and some are from macroeconomic measures. However this study is based on the blend. It considers the Real GDP per Capita, Inflation, and Total Loans as independent variables, and Non Performing Loan Ratio as dependent variable. Study uses the data of US banking sector from official web sources of US Federal Reserve System. Years from 1985 to 2010 constitute the study period. Employing correlation and regression tests show that research model used is of good statistical health. All the selected independent variables have significant impact on the depended variable, however, values of coefficients are not much high. Banks should control and amend their credit advancement policy with respect to mentioned variables to have lower non-performing loan ratio.

Suggested Citation

  • Irum Saba & Rehana Kouser & Muhammad Azeem, 2012. "Determinants of Non Performing Loans: Case of US Banking Sector," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(44), pages 125-136, June.
    • Handle: RePEc:rej:journl:v:15:y:2012:i:44:p:125-136
    as

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    References listed on IDEAS

    as
    1. Vicente Salas & Jesús Saurina, 2002. "Credit Risk in Two Institutional Regimes: Spanish Commercial and Savings Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 22(3), pages 203-224, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Non Performing Loans; Determinants; NPLs; Banks; Write-offs; United States;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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