Non-Performing Loans, Governance Indicators and Systemic Liquidity Risk: Evidence From Greece

BANK OF GREECE WORKING PAPERS,No.260

25 Pages Posted: 23 Sep 2019

See all articles by Dimitrios Anastasiou

Dimitrios Anastasiou

Alpha Bank; Athens University of Economics and Business, School of Business, Department of Accounting and Finance

Zacharias Bragoudakis

Bank of Greece; National and Kapodistrian University of Athens, Department of Economics

Ioannis Malandrakis

Athens University of Economics and Business

Multiple version iconThere are 2 versions of this paper

Date Written: May 30, 2019

Abstract

In this study we propose a new determinant of non-performing loans for the case of the Greek banking sector. We employ aggregate yearly data for the period 1996- 2016 and we conduct a Principal Component Analysis for all the Worldwide Governance Indicators (WGI) for Greece, aiming to isolate the common component and thus to create the GOVERNANCE indicator. We find that the GOVERNANCE indicator is a significant determinant of Greek banks’ non-performing loans indicating that both political and governance factors impact on the level of the Greek non-performing loans. An additional variable that also has a statistically significant impact on the level of Greek non-performing loans, when combined with WGI in the dynamic specification of our model, is systemic liquidity risk. Our results could be of interest to policy makers and regulators as a macro prudential policy tool.

Keywords: Credit risk; Greek banking sector; Non-performing loans; Systemic liquidity risk; Worldwide Governance Indicators

JEL Classification: C51, G21, G2, G38

Suggested Citation

Anastasiou, Dimitrios and Bragoudakis, Zacharias and Malandrakis, Ioannis, Non-Performing Loans, Governance Indicators and Systemic Liquidity Risk: Evidence From Greece (May 30, 2019). BANK OF GREECE WORKING PAPERS,No.260, Available at SSRN: https://ssrn.com/abstract=3402414 or http://dx.doi.org/10.2139/ssrn.3402414

Dimitrios Anastasiou

Alpha Bank ( email )

Athens, 16561
Greece

Athens University of Economics and Business, School of Business, Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Zacharias Bragoudakis (Contact Author)

Bank of Greece ( email )

21 E. Venizelos Avenue
GR 102 50 Athens
Greece
+302103203605 (Phone)

National and Kapodistrian University of Athens, Department of Economics ( email )

Sofocleous 1
Athens, 105 59
Greece
+30 21 0368 9400 (Phone)

HOME PAGE: http://www.econ.uoa.gr/

Ioannis Malandrakis

Athens University of Economics and Business ( email )

76 Patission Street
Athens
Greece

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