Non-performing loans in European systemic and non-systemic banks

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: The distinction between GSIBs (systemic banks) and non GSIBs (non-systemic banks) is driven by policy reasons. I examine the behaviour of non-performing loans in European systemic and non-systemic banks, and find that more profitable banks witness higher non-performing loans regardless of whether they are systemic or non-systemic. Systemic banks have fewer non-performing loans during economic booms and during periods of increased lending while non-systemic banks experience higher NPLs during periods of increased lending. I also observe that European non-systemic banks that exceed regulatory capital requirements have higher NPLs. In the post-2007 financial crisis period, the NPL of systemic banks is negatively associated with the economic cycle which imply that the NPL of systemic banks is procyclical with the state of the economy, and the NPL of systemic banks are positively associated with loan supply and bank profitability. On the other hand, the NPL of non-systemic banks is negatively associated with regulatory capital ratios, and is positively associated with bank profitability for non-systemic banks in the post-2007 financial crisis period. The findings have implications.

Keywords: credit risk, nonperforming loans, systemic banks, systemic risk, impaired loans, asset quality; European banks, Europe, bank profitability. (search for similar items in EconPapers)
JEL-codes: G01 G02 G18 G21 G23 G28 G32 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ban and nep-eec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://mpra.ub.uni-muenchen.de/94008/1/MPRA_paper_94008.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/95112/1/MPRA_paper_95112.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/95236/1/MPRA_paper_95236.pdf revised version (application/pdf)

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Journal Article: Non-performing loans in European systemic and non-systemic banks (2019)
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