This paper investigates the determinants of the stocks and flows (both in- and outflows) of nonperforming loans (NPLs) by considering a bank-specific factor that is not adequately analysed in the literature, namely, bank capital buffers. Using unbalanced panel data with 6,087 bank-year observations for the 2006–2018 period and a two-step system generalised method of moments (GMM) estimation, we find that banks with higher levels of capital buffers (both in terms of Tier 1 and total capital) have fewer NPL stocks and generate fewer NPL inflows. When we control for the characteristics of the loan portfolio, real guarantees collected by the bank increase the stocks and flows of new, impaired loans, while personal guarantees favour the outflow of bad loans.

Cicchiello, A. F., Cotugno, M., Perdichizzi, S., Torluccio, G., Do capital buffers matter? Evidence from the stocks and flows of nonperforming loans, <<INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS>>, 2022; 2022 (84): N/A-N/A. [doi:10.1016/j.irfa.2022.102369] [http://hdl.handle.net/10807/215844]

Do capital buffers matter? Evidence from the stocks and flows of nonperforming loans

Cicchiello, A. F.;Cotugno, M.;
2022

Abstract

This paper investigates the determinants of the stocks and flows (both in- and outflows) of nonperforming loans (NPLs) by considering a bank-specific factor that is not adequately analysed in the literature, namely, bank capital buffers. Using unbalanced panel data with 6,087 bank-year observations for the 2006–2018 period and a two-step system generalised method of moments (GMM) estimation, we find that banks with higher levels of capital buffers (both in terms of Tier 1 and total capital) have fewer NPL stocks and generate fewer NPL inflows. When we control for the characteristics of the loan portfolio, real guarantees collected by the bank increase the stocks and flows of new, impaired loans, while personal guarantees favour the outflow of bad loans.
Inglese
Cicchiello, A. F., Cotugno, M., Perdichizzi, S., Torluccio, G., Do capital buffers matter? Evidence from the stocks and flows of nonperforming loans, <<INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS>>, 2022; 2022 (84): N/A-N/A. [doi:10.1016/j.irfa.2022.102369] [http://hdl.handle.net/10807/215844]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/215844
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