Determinants of Non-Performing Loans: Evidence from Europe

  •  Antonio Salvi    
  •  Candida Bussoli    
  •  Lavinia Conca    
  •  Marisa Gigante    


The issue of banks’ loan quality has assumed growing importance at the international level. This study aims to tackle the issue and to verify the impact of bank-specific determinants and macroeconomic indicators on banks’ loan quality.

The analysis is conducted on a sample of 2,816 European banks over the period 2011-2015 through a multivariate regression with panel data.

The main evidence shows that a higher return on average assets and a greater soundness of the bank can be associated with a better loan quality. Furthermore, the results also demonstrate that system conditions can contribute to determining banks’ asset quality. Adverse cyclical conditions, resulting from a lower GDP growth and a higher unemployment rate, can generate a lower loan quality.

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