Open Economies Review

, Volume 26, Issue 3, pp 525–550 | Cite as

Key Determinants of Non-performing Loans: New Evidence from a Global Sample

  • Roland Beck
  • Petr Jakubik
  • Anamaria Piloiu
Research Article


Using a novel panel data set we study the macroeconomic determinants of non-performing loans (NPLs) across 75 countries during the past decade. According to our dynamic panel estimates, the following variables are found to significantly affect NPL ratios: real GDP growth, share prices, the exchange rate, and the lending interest rate. In the case of exchange rates, the direction of the effect depends on the extent of foreign exchange lending to unhedged borrowers which is particularly high in countries with pegged or managed exchange rates. In the case of share prices, the impact is found to be larger in countries which have a large stock market relative to GDP. These results are robust to alternative econometric specifications.


Non-performing loans Credit risk Currency mismatches 

JEL Classification

G21 G28 G32 F34 



The authors would like to thank Elitza Mileva, Jorn Zenhorst, Roland Straub, Philipp Hartmann for useful comments. The views expressed in this paper are those of the authors and do not necessarily reflect those of the institutions the authors are affiliated with or those of the Eurosystem. Financial support from Grant Agency of the Czech Republic GACR 14-02108S is gratefully acknowledged.


  1. Arellano M, Bond S (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations, Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277–97Google Scholar
  2. Bank of England (2008) Financial stability report, 2008, OctoberGoogle Scholar
  3. Bernanke B, Gertler M (1989) Agency costs, net worth, and business fluctuations. Am Econ Rev 79(1):14–31Google Scholar
  4. Bernanke B, Gertler M, Gilchrist S (1998) the financial accelerator in a quantitative business cycle framework, NBER Working Papers 6455, 1998Google Scholar
  5. Blavy R, Souto M (2009) Estimating default frequencies and macrofinancial linkages in the Mexican banking sector, IMF Working Papers 09/109, 2009Google Scholar
  6. Board of Governors of the Federal Reserve System (2009a) The supervisory capital assessment program: design and implementation,
  7. Board of Governors of the Federal Reserve System (2009b) The supervisory capital assessment program: overview of results
  8. Boss M, Krenn G, Schwaiger M, Wegschaider W (2004) Stress testing the Austrian banking system. Österreichisches Bankarchiv 11(04):841–852Google Scholar
  9. Čihák M (2007) Introduction to applied stress testing”, IMF Working Paper 07/59, 2007Google Scholar
  10. Committee of European Banking Supervisors (CEBS) (2010) Aggregate outcome of the 2010 EU wide stress testing exercise coordinated by CEBS in cooperation with the ECB, 2010, JulyGoogle Scholar
  11. Drehman M (2005) A market based macro stress test for the corporate credit exposures of UK banks. Bank for International Settlement, 2005Google Scholar
  12. Espinoza RA, Prasad A (2010) Nonperforming loans in the GCC banking system and their macroeconomic effects, IMF Working Papers 10/224, 2010Google Scholar
  13. European Banking Authority (2011) EU-Wide stress test aggregate report, 2011, JulyGoogle Scholar
  14. Fungačová Z, Jakubík P (2012) Bank stress tests as an information device for emerging markets: the case of Russia, BOFIT Discussion Papers 3/2012, Bank of Finland, Institute for Economies in TransitionGoogle Scholar
  15. Gerlach S, Peng W (2005) Bank lending and property prices in Hong Kong. J Bank Financ 29:461–481CrossRefGoogle Scholar
  16. Glen J, Mondragón-Vélez C (2011) Business cycle effects on commercial bank loan portfolio performance in developing economies. International Finance Corporation, World Bank GroupGoogle Scholar
  17. Hamerle A, Liebig T, Scheule H (2004) Forecasting credit portfolio risk, Discussion Paper Series 2: Banking and Financial Super-vision 1, Deutsche Bundesbank, 2004Google Scholar
  18. Hausmann R, Panizza U, Stein E (2001) Why do countries float the way they float? J Dev Econ 66(2):387–414CrossRefGoogle Scholar
  19. Jakubík P, Sutton G (2011) Thoughts on the proper design of macro stress tests, BIS Papers chapters, macroprudential regulation and policy, Vol. 60, Bank for International Settlements, pp 111–119, DecemberGoogle Scholar
  20. Jakubík P (2007) Macroeconomic environment and credit risk. Czech J Econ Finan 57(1–2):41–59Google Scholar
  21. Jakubík P, Schmieder C (2008) Stress testing credit risk: comparison of the Czech Republic and Germany. Financial Stability Institute, Bank for International SettlementsGoogle Scholar
  22. King RG, Plosser CI (1984) Money, credit, and prices in a real business cycle. Am Econ Rev 74(3):363–380Google Scholar
  23. Kiyotaki N, Moore J (1997) Credit cycles, J Political Econ, University of Chicago Press, vol. 105(2), pages 211–48, 1997Google Scholar
  24. Lane PR, Shambaugh JC (2010) Financial exchange rates and international currency exposures. Am Econ Rev 100(1):518–540CrossRefGoogle Scholar
  25. Louzis DP, Vouldis AT, Metaxas VL (2010) Macroeconomic and bank-specific determinants of non-performing loans in Greece: a comparative study of mortgage, business and consumer loan portfolios, Working Papers 118, Bank of Greece, 2010Google Scholar
  26. Maddala GS, Wu S (1999) A comparative study of unit root tests with panel data and a new simple test, Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631–52, Special I, 1999Google Scholar
  27. Nkusu M (2011) Nonperforming loans and macrofinancial vulnerabilities in advanced economies, IMF Working Paper 11/161, 2011Google Scholar
  28. Pesaran MH, Schuermann T, Treutler B, Weiner SM (2006) Macroeconomic dynamics and credit risk: a global perspective. J Money Credit Bank 5(38):1211–1261CrossRefGoogle Scholar
  29. Peng W, Lai K, Leung F, Shu Ch (2003) The impact of interest rate shocks on the performance of the banking sector, Hong Kong Monetary Authority Research Memorandum, May 2003Google Scholar
  30. Pesola J (2005) Banking fragility and distress: an econometric study of macroeconomic determinants, Bank of Finland Research Discussion Papers No. 13, Bank of Finland, 2005Google Scholar
  31. Quagliariello M (2007) Banks’ riskiness over the business cycle: a panel analysis on Italian intermediaries. Appl Fin Econ Taylor Francis J 17(2):119–138Google Scholar
  32. Roodman D (2006) How to do xtabond2, North American Stata Users’ Group Meetings 2006 8, Stata Users Group, 2006Google Scholar
  33. Schmieder Ch, Puhr C, Hasan M (2011) Next generation balance sheet stress testing, IMF Working Paper 11/83, 2011Google Scholar
  34. Salas V, Saurina J (2002) Credit risk in two institutional regimes: Spanish commercial and savings banks. J Financ Serv Res 22(3):203–224CrossRefGoogle Scholar
  35. Wooldridge JM (2002) Econometric analysis of cross section and panel data, MIT Press Books, The MIT Press, edition 1, volume 1, 2002Google Scholar

Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.European Central BankFrankfurtGermany
  2. 2.European Insurance and Occupational Pensions Authority (EIOPA)FrankfurtGermany
  3. 3.Czech National BankPragueCzech Republic
  4. 4.Institute of Economic StudiesCharles University in PraguePragueCzech Republic
  5. 5.Deutsche Bank ResearchFrankfurtGermany
  6. 6.Goethe University FrankfurtFrankfurtGermany

Personalised recommendations