The impact of low interest rates on banks' non-performing loans

Matěj Maivald and Petr Teply

No 2.002, FFA Working Papers from Prague University of Economics and Business

Abstract: The paper examines the impact of a low interest rate environment on banks' credit risk measured by the non-performing loan (NPL)/total loans ratio. We analyse a unique sample of annual data on 823 banks from the Eurozone, Denmark, Japan, Sweden, and Switzerland for the 2011-2017 period, which also covers the period of zero and negative rates. We conclude that after 1 year of low interest rates, the NPL ratio increases. Our results are mostly consistent with the findings of previous research, and the majority of differences can be explained by the changes in the economic environment during the period with low interest rates.

Keywords: banks; credit risk; low interest rates; non-performing loans (search for similar items in EconPapers)
JEL-codes: C33 E43 G21 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2020-02-17, Revised 2020-02-25
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-mac
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