Non-Performing Loans and Financial Development: New Evidence

The Journal of Risk Finance (2019)

34 Pages Posted: 5 Jan 2017 Last revised: 2 Mar 2019

See all articles by Peterson K Ozili

Peterson K Ozili

Central Bank of Nigeria; Central Bank of Nigeria

Date Written: 2019


The study investigates the influence of financial development on non-performing loans using a global sample. The findings indicate that two financial development proxies, foreign bank presence and financial intermediation, are positively associated with non-performing loans. Among the determinants of non-performing loans, bank efficiency, loan loss coverage ratio, competition and banking system stability are inversely associated with NPLs while NPLs are positively associated with banking crises and bank concentration. In the regional analysis, NPLs are negatively associated with regulatory capital and bank liquidity, implying that banking sectors with greater regulatory capital and liquidity experience fewer NPLs. National bank regulators/supervisor should not only take into account the role that financial development structures play in influencing aggregate non-performing loans but should also ensure that thorough supervision of the lending practices of banks is in place as well as the active monitoring of the financial intermediation process in the country.

Keywords: Non-performing loans; credit risk; financial development; banking crisis; foreign banks; financial intermediation; banking sector development; efficiency; liquidity; asset quality; bank concentration, banking stability; Sub-saharan Africa; MENA; Europe; Asia-Pacific; Latin America

JEL Classification: E44, G01, G21, G28, G32, F34, O16

Suggested Citation

Ozili, Peterson K, Non-Performing Loans and Financial Development: New Evidence (2019). The Journal of Risk Finance (2019). Available at SSRN: or

Peterson K Ozili (Contact Author)

Central Bank of Nigeria ( email )

Plot 33, Abubakar Tafawa Balewa Way
Central Business District, Cadastral Zone

Central Bank of Nigeria ( email )

Abuja, 09

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