Bad loans and resource allocation in crisis years: Evidence from European banks

Brunella Bruno () and Immacolata Marino

No 1752, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: The aim of this study is to explore the relation between loan portfolio quality and lending in European banks over 2005-2014. We focus on lending behavior of banks from distressed countries since the Euro sovereign debt crisis. Our results confirm the existence of a negative nexus between poor loan quality and lending, since a higher NPL ratio explains a reduced loan growth and a lower allocation to loans at the advantage of government debt (as a percentage of total assets). Such an impact on lending and reallocation effect are strong and consistent across specifications and over and above other factors that may affect credit supply.

Keywords: bad loans; NPLs; non-performing loans; bank lending; crisis (search for similar items in EconPapers)
JEL-codes: G01 G20 G21 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2017
New Economics Papers: this item is included in nep-ban and nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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