Macroeconomic and Bank-Specific Determinants of Non-Performing Loans in Greece: A Comparative Study of Mortgage, Business and Consumer Loan Portfolios

Abstract

This paper uses dynamic panel data methods to examine the determinants of nonperforming 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 Classification: G21, C23