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MACROECONOMIC, STRUCTURAL, AND BANK-SPECIFIC DETERMINANTS OF NON-PERFORMING LOANS IN CENTRAL AND EASTERN EUROPE

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Shala A., Toçi V., Mustafa A.
Ekonomický časopis (Journal of Economics)
|
2022
|
vol. 70
|
issue 5
411 – 429
EN
The study of credit risk has gained significant importance in the aftermath of the global financial crisis of 2007 – 2008. Estimating the determinants of non-performing loans (NPLs), as an important indicator of credit risk in the banking sector, is essential for financial stability policies. The main goal of this research is to examine the determinants of NPLs in Central and Eastern European countries (CEE). This paper analyses macroeconomic, structural, and bank-specific determinants of NPLs for 17 CEE countries for the period 2006 – 2017 by utilizing panel data and the fixed effects model. Although the literature on NPLs is quite extensive, this is the first empirical research with such a large number of countries from the CEE region using country-level data. The baseline analysis suggests that the unemployment rate, inflation rate, credit growth, crisis, bank concentration, and regulatory quality have a significant impact on NPLs. Unexpectedly, the law enforcement of creditor rights, proxied by various indicators, is not a statistically significant determinant of NPLs. The result of the study contributes to the literature on banking regulation and supervision, especially in the context of the CEE region.
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