Do retail-oriented banks have less non-performing loans?

Matteo Farnè and Angelos Vouldis

The Journal of Economic Asymmetries, 2024, vol. 29, issue C

Abstract: We present empirical evidence that euro area banks following a retail-oriented financial intermediation business model exhibit a lower level of non-performing loans in their loan portfolio compared to the banks involved to a larger degree in market activities. This result is confirmed separately for the subsets of banks operating in distress and non-distress countries. We primarily utilise a business model classification that is underpinned by granular confidential supervisory data collected in the context of the EU Single Supervisory Mechanism. We control for macroeconomic developments, a number of bank-specific determinants and endogeneity, using an instrumental variables approach. Our results remain robust to the application of a wide range of specifications and estimation methods.

Keywords: Non-performing loans; Bank business model; Endogenous treatment; System GMM (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:29:y:2024:i:c:s1703494924000070

DOI: 10.1016/j.jeca.2024.e00358

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