How Do Banks Respond to Non-Performing Loans?
Brunella Bruno () and
Immacolata Marino ()
CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy
We exploit the first European Central Bank's Asset Quality Review as a quasi-experiment to investigate the effect on banks' balance sheets of a shock to Non-Performing Loans (NPLs). We found that the banks included in the review with higher unexpected changes to their NPLs, deleveraged and reduced their lending more than non-reviewed banks. The effect is non-linear and is stronger among reviewed banks located in high-NPL countries. The banks affected the most were undercapitalised and unprofitable, suggesting that NPLs influence the credit supply via a capital/profitability channel.
Keywords: Banks; asset quality; NPLs; credit supply. (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2018-11-09, Revised 2021-07-30
New Economics Papers: this item is included in nep-ban and nep-eec
Note: A previous version has been circulated under the title “How Banks Respond to NPLs? Evidence from the Euro Area".
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:513
Access Statistics for this paper
More papers in CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Maria Carannante ().