The Dynamics of Non-Performing Loans During Banking Crises: A New Database

This paper presents a new dataset on the dynamics of non-performing loans (NPLs) during 88 banking crises since 1990. The data show similarities across crises during NPL build-ups but less so during NPL resolutions. We find a close relationship between NPL problems—elevated and unresolved NPLs—and the severity of post-crisis recessions. A machine learning approach identifies a set of pre-crisis predictors of NPL problems related to weak macroeconomic, institutional, corporate, and banking sector conditions. Our findings suggest that reducing pre-crisis vulnerabilities and promptly addressing NPL problems during a crisis are important for post-crisis output recovery.

Keywords: banking crises, crisis resolution, debt, non-performing loans, recessions

JEL Classification: E32, E44, G21, N10, N20

Suggested Citation: Suggested Citation

Ari, Anil and Chen, Sophia and Ratnovski, Lev and Ratnovski, Lev, The Dynamics of Non-Performing Loans During Banking Crises: A New Database (April, 2020). ECB Working Paper No. 2395, Available at SSRN: https://ssrn.com/abstract=3580827 or http://dx.doi.org/10.2139/ssrn.3580827