EXPLORING THE FACTORS LEADING TO LOAN DELINQUENCY

Abstract

This study explores an empirical approach to detect the determinants of problem loans for a sample of 135 European banks. We focused on banks belonging to the countries most affected by the 2008 financial crisis, namely Spain, Greece and Italy. Inspired by the pioneering works, we chose bank-specific factors and macroeconomic factors as determinants of bad loans. Our result shows that non-performing loans depend positively on unemployment rates, inflation rates and loan loss provisions. These problem loans vary negatively on GDP growth rates and return on equity.