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Macroeconomic determinants of the quality of banks' loan portfolio in Serbia

Author

Listed:
  • Dragiša Otaševic

    (National Bank of Serbia)

Abstract

This paper investigates macroeconomic determinants of the realisation of credit risk in the banking book (measured by the ratio of loan loss provisions to the value of total gross loans) using a panel data set of 33 Serbian banks spanning from 2008Q3 to 2012Q2. Three different panel methods were applied. Two types of loan portfolios were investigated separately – loans to households and loans to enterprises. The results indicate that a deteriorating business cycle and exchange rate depreciation led to the worsening of the quality of banks’ loan portfolio in Serbia in the period under review. In addition, statistical evidence indicates that the CPI inflation additionally affected the quality of loans to enterprises and households. Furthermore, we find that household loan portfolios are also sensitive to changes in the short-run interest rates.

Suggested Citation

  • Dragiša Otaševic, 2013. "Macroeconomic determinants of the quality of banks' loan portfolio in Serbia," Working papers 27, National Bank of Serbia.
    • Handle: RePEc:nsb:wpaper:27
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    File URL: https://www.nbs.rs/export/sites/NBS_site/documents/publikacije/strucni-radovi/2013_27_DO.pdf
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    More about this item

    Keywords

    Loan portfolio; Credit quality; Economic activity; Exchange rate; Foreign currency induced Credit risk; Serbia;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • 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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