The evolution and determinants of the non-performing loan burden in Italian banking

Livia Pancotto, Owain ap Gwilym and Jonathan Williams

Pacific-Basin Finance Journal, 2024, vol. 84, issue C

Abstract: We investigate the factors influencing Non-Performing Loans (NPLs) in the Italian banking sector from 2011 to 2017, a period marked by significant challenges. Using dynamic panel data methods and considering both bank-specific and macroeconomic variables, our empirical analysis reveals the complexity of NPL volumes in Italy. Our findings highlight that better capitalised banks tend to exhibit lower levels of NPLs, indicating reduced incentives for engaging in riskier practices. We document an inverse relationship between credit growth and NPLs, suggesting a potential outcome of demand-driven credit expansion. Additionally, the countercyclical nature of NPL stocks is evident, with banks' NPL volumes influenced by the economic conditions of the country.

Keywords: Non-performing loans; Financial stability; Dynamic panel data; GMM estimations; Italian banking system (search for similar items in EconPapers)
JEL-codes: C23 E44 G21 G28 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:84:y:2024:i:c:s0927538x2400057x

DOI: 10.1016/j.pacfin.2024.102306

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