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Determinants of Non-Performing Loans: The Case of Eurozone

Author

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  • Vasiliki Makri
  • Athanasios Tsagkanos
  • Athanasios Bellas

Abstract

The purpose of the present study is to identify the factors affecting the non-performing loans rate (NPL) of Eurozone’s banking systems for the period 2000-2008, just before the beginning of the recession. In our days, Eurozone is in the middle of an unprecedented financial crisis, calling into question the soundness of the banking systems of European countries. Looking at both macro-variables (e.g. annual percentage growth rate of gross domestic product, public debt as % of gross domestic product, unemployment) and micro-variables (e.g. loans to deposits ratio, return on assets, return on equity), we investigate which factors determine NPL on aggregate level. Overall, our findings reveal strong correlations between NPL and various macroeconomic (public debt, unemployment, annual percentage growth rate of gross domestic product) and bank-specific (capital adequacy ratio, rate of non-performing loans of the previous year and return on equity) factors. Key words: Non-performing loans, Bank specific variables, Macroeconomic variables, GMM difference.JEL: C23, G21

Suggested Citation

  • Vasiliki Makri & Athanasios Tsagkanos & Athanasios Bellas, 2014. "Determinants of Non-Performing Loans: The Case of Eurozone," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(2), pages 193-206.
    • Handle: RePEc:voj:journl:v:61:y:2014:i:2:p:193-206:id:72
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    Cited by:

    1. Abdulmuttalip Pilatin, 2023. "The Effect of Bank Employees with a Postgraduate Education Level on Credit Risk and Financial Performance," Istanbul Business Research, Istanbul University Business School, vol. 52(2), pages 407-436, August.
    2. MBelen Salas & Prosper Lamothe & Enrique Delgado & Angel L. Fernández-Miguélez & Lucia Valcarce, 2024. "Determinants of Nonperforming Loans: A Global Data Analysis," Computational Economics, Springer;Society for Computational Economics, vol. 64(5), pages 2695-2716, November.
    3. Richard Reichel, 2024. "Determinants of Asset Value Adjustments: The Case of Germany’s Cooperative Banks," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 14(2), pages 1-7.
    4. Alessandra Donini & Giulia Fusi & Mattia Picarelli, 2025. "Asset-Quality-at-Risk," Working Papers 69, European Stability Mechanism, revised 21 Feb 2025.
    5. Brikena Leka & Etleva Bajrami & Ejona Duci, 2019. "Key Macroeconomic Drivers on Reducing Non Performing Loans in Albania," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 8, July.
    6. Jean-Charles Bricongne & Mathilde Dufouleur, 2024. "Impact of Insolvency Regimes on NPLs: Two Birds in the Bush is WorThéone in the Hand," Working papers 953, Banque de France.
    7. Nguyen Kim Quoc Trung, 2021. "The relationship between internal control and credit risk – The case of commercial banks in Vietnam," Cogent Business & Management, Taylor & Francis Journals, vol. 8(1), pages 1908760-190, January.
    8. Hazar Altınbaş & Gülay Hanişoğlu, 2023. "Forecasting and Evaluation of Non-Performing Loans in the Turkish Banking Sector," Istanbul Business Research, Istanbul University Business School, vol. 52(2), pages 381-406, August.
    9. Mafo Tchinda, Ghislaine & Bouwawe, Duclo & Mbondo, Georges Dieudonné, 2025. "Performance du secteur bancaire des pays d’Afrique Subsaharienne (ASS) : les effets différenciés de la croissance économique [Banking sector performance in Sub-Saharan Africa (SSA): the differentia," MPRA Paper 123809, University Library of Munich, Germany.
    10. Intan Suhaila Maulad Haji Md Isa & Raziah Bi Mohamed Sadique & Norhayati Alias & Noor Hasniza Haron, 2023. "Factors Affecting Non-Performing Loans of Commercial Banks in Malaysia," Accounting and Finance Research, Sciedu Press, vol. 12(4), pages 1-32, November.
    11. Hajdaraj, Besa & Aliu, Muhamet, 2023. "Impact of Covid-19 and Non-performing Loan Determinants: Case Study Republic of Kosovo," Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference (2023), Hybrid Conference, Dubrovnik, Croatia, in: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Hybrid Conference, Dubrovnik, Croatia, 4-6 September, 2023, pages 81-92, IRENET - Society for Advancing Innovation and Research in Economy, Zagreb.
    12. Vo Minh Long & Nguyen Thi Yen & Pham Dinh Long, 2020. "Factors affecting Non-Performing Loans (NPLs) of banks: The case of Vietnam," HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION, HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE, HO CHI MINH CITY OPEN UNIVERSITY, vol. 10(2), pages 83-93.
    13. Anju Goswami & Pooja Malik, 2024. "Identifying Financial Performance Drivers in the Indian Banking Sector During the COVID-19 Crisis," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 22(3), pages 667-719, September.
    14. Aleksandra Ostrowska, 2023. "Makroekonomiczne determinanty jakości kredytów dla sektora niefinansowego w Polsce," Bank i Kredyt, Narodowy Bank Polski, vol. 54(5), pages 541-556.
    15. Nam Pham Hai & Chi Le Ha Diem, 2024. "Credit risk of Vietnamese commercial banks: does capital structure matter?," Journal of Banking Regulation, Palgrave Macmillan, vol. 25(3), pages 272-283, September.

    More about this item

    Keywords

    : Non-performing loans; Bank specific variables; Macroeconomic variables; GMM difference;
    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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