TY - JOUR

T1 - The evolution and determinants of the non-performing loan burden in Italian banking

AU - Pancotto, Livia

AU - ap Gwilym, Owain

AU - Williams, Jonathan

PY - 2024/4

Y1 - 2024/4

N2 - We investigate the factors influencing Non-Performing Loans (NPLs) in the Italian banking sector from 2011 to 2017, a period marked by significant challenges. Using dynamic panel data methods and considering both bank-specific and macroeconomic variables, our empirical analysis reveals the complexity of NPL volumes in Italy. Our findings highlight that better capitalised banks tend to exhibit lower levels of NPLs, indicating reduced incentives for engaging in riskier practices. We document an inverse relationship between credit growth and NPLs, suggesting a potential outcome of demand-driven credit expansion. Additionally, the countercyclical nature of NPL stocks is evident, with banks’ NPL volumes influenced by the economic conditions of the country.

AB - We investigate the factors influencing Non-Performing Loans (NPLs) in the Italian banking sector from 2011 to 2017, a period marked by significant challenges. Using dynamic panel data methods and considering both bank-specific and macroeconomic variables, our empirical analysis reveals the complexity of NPL volumes in Italy. Our findings highlight that better capitalised banks tend to exhibit lower levels of NPLs, indicating reduced incentives for engaging in riskier practices. We document an inverse relationship between credit growth and NPLs, suggesting a potential outcome of demand-driven credit expansion. Additionally, the countercyclical nature of NPL stocks is evident, with banks’ NPL volumes influenced by the economic conditions of the country.

KW - Non-performing loans; Securitisation; Financial stability; Dynamic panel data methods; Italian banking reform

U2 - 10.1016/j.pacfin.2024.102306

DO - 10.1016/j.pacfin.2024.102306

M3 - Article

VL - 84

JO - Pacific-Basin Finance Journal

JF - Pacific-Basin Finance Journal

SN - 0927-538X

M1 - 102306

ER -