Non-performing loans: Systemic effects on the banking Industry
Description
This paper explores the universe of non-performing loans and tries to examine the effects that a sharp increase in NPLs would cause. The first part of the paper explores some of the most shared definitions of NPL as well as the accounting treatment under IFRS (International Financial Reporting Standards). In the second part of the paper, literature regarding determinants of NPLs is summarized and categorized into three broad categories: macroeconomic determinants, institutional variables, and bank-specific variables. Eventually, in the last part of the paper, a fictional bank is built and tested against a two and three standard deviation NPL events. The worst loss occurring in the simulated events eroded 26% of the capital (2.55% of the assets) forcing the fictional bank to recapitalize and experience expensive recovery processes.
Date Created
The date the item was original created (prior to any relationship with the ASU Digital Repositories.)
2018-12
Agent
- Author (aut): Franceschi, Stefano
- Thesis director: Simonson, Mark
- Committee member: Budolfson, Arthur
- Contributor (ctb): Economics Program in CLAS
- Contributor (ctb): Department of Finance
- Contributor (ctb): School of Mathematical and Statistical Sciences
- Contributor (ctb): Barrett, The Honors College