Management and Resolution Methods of Non-performing Loans: A Review of the Literature
28 Pages Posted: 18 Aug 2016 Last revised: 13 Mar 2017
Date Written: August 18, 2016
In the financial crisis of 2007, many banks with high level of NPLs found their sources of capital dried up, which occurred because of bad management. Huge amounts of NPLs imply both a lack of management methods and lack of capital. Also, high NPL levels have resulted to negative effects to banks’ lending activity, making bank officers-managers more concern for the future of the whole banking system. The purpose of this study is twofold. First, to present some NPL management methods that already exist in the literature and second, to make a clear distinction between the ex-post and ex-ante management of NPLs. I tried to collect in one paper what other researchers suggested for the proper management and fight against NPLs for different kinds of banking systems around the world. Hopefully, by examining these methods, banks will be able to cope with the problem of NPLs.
Keywords: Non-performing loans, NPL management, bank restructuring, financial stability, macroprudential policy, poor credit risk management
JEL Classification: G21, G28, G38
Suggested Citation: Suggested Citation