MACROECONOMIC AND BANK-SPECIFIC DETERMINANTS OF NON-PERFORMING LOANS IN GREECE: A COMPARATIVE STUDY OF MORTGAGE, BUSINESS AND CONSUMER LOAN PORTFOLIOS
Dimitrios P. Louzis
Bank of Greece and Athens University of Economics and Business
Angelos T. Vouldis
Bank of Greece and University of Athens
Vasilios L. Metaxas
Bank of Greece
This paper uses dynamic panel data methods to examine the determinants of non-performing loans (NPLs) in the Greek banking sector, separately for each type of loan (consumer, business and mortgage loans). The study is motivated by the hypothesis that both macroeconomic and bank-specific variables have an effect on loan quality and that these effects vary between different categories of loans. The results show that NPLs in the Greek banking system can be explained mainly by macrofundamentals (GDP, unemployment, interest rates) and management quality. Differences in the quantitative impact of macroeconomic factors among types of loans are evident with non-performing mortgages being the least responsive towards changes in the macroeconomic conditions.
Keywords: Non-perfoming loans; Greek banking system; Macroeconomic determinants; Bank specific determinants; Dynamic panel data
JEL classifications codes: G21; C23
Aknowledgments: We are grateful to H. Gibson, S. Hall, N. Tsaveas, M. Mavridou, K. Zavandis, N. Stavrianou, V. Nydrioti, I. Zourka, S. Liakopoulou and all colleagues from the Financial Stability Department of the Bank of Greece for their valuable comments and useful discussions. We would also like to acknowledge the discussants’ comments on this paper from M. Melecky at the World Bank Seminar “Advances in Stress Testing in Central and South Eastern Europe” on 19-20 May 2010 in Thessaloniki. The views of the paper do not necessarily reflect those of the Bank of Greece.
Financial Stability Department,