The Dynamics of Non-Performing Loans during Banking Crises: A New Database with Post-COVID-19 Implications

97 Pages Posted: 6 May 2021

See all articles by Anil Ari

Anil Ari

International Monetary Fund

Sophia Chen

International Monetary Fund (IMF) - Research Department

Lev Ratnovski

International Monetary Fund; European Central Bank, Financial Research Division

Date Written: May 1, 2021

Abstract

We present a new dataset on the dynamics of non-performing loans (NPLs) during 92 banking crises since 1990. The data show similarities across crises during NPL build-ups but much heterogeneity in the pace of NPL resolution. We document how high and unresolved NPLs deepen post-crisis recessions and use a machine learning approach to establish pre-crisis predictors of NPL problems. These predictors—a set of weak macroeconomic, institutional, corporate, and banking sector conditions—help shed light on post-COVID-19 NPL vulnerabilities.

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

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

Suggested Citation

Ari, Anil and Chen, Sophia and Ratnovski, Lev, The Dynamics of Non-Performing Loans during Banking Crises: A New Database with Post-COVID-19 Implications (May 1, 2021). Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3840981 or http://dx.doi.org/10.2139/ssrn.3840981

Anil Ari

International Monetary Fund ( email )

700 19th Street NW
Washington, DC 20431
United States

HOME PAGE: http://https://sites.google.com/site/anlari/

Sophia Chen

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Lev Ratnovski (Contact Author)

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://ratnovski.googlepages.com

European Central Bank, Financial Research Division

Germany

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