Macroeconomic and specific banking determinants of nonperforming loans in Bosnia and Herzegovina

Abstract

The aim of the research is to identify the macroeconomic and specific banking factors affecting the rate of nonperforming loans in the banking sector of Bosnia and Herzegovina (BiH). The authors assume that the three macroeconomic and five specific banking factors influence the quality of the loan portfolio. Aggregate data were used, which are taken from the Central Bank of BiH, Agency for Statistics of BiH and Labour and Employment Agency of BiH, and analyzed by descriptive statistics, correlation and regression analysis in the period from the first quarter of 2006 to the end of the fourth quarter of 2016. The empirical results show that there is a correlation between nonperforming loans and unemployment rate, inflation rates measured by the growth rate of consumer prices, return on assets and credit growth rates, while the impact of the growth rate of real gross domestic product, capital adequacy ratio, return on equity and active interest rates is not statistically significant.

The Macroeconomic Effects on Non-Performing Loan and its Implication on Allowance for Impairment Losses

“…From the banking side, it indicates that there is a possibility of mismanagement of credit distribution by the bank. The results of this research are in a row with the results of the previous studies conducted by Ouhibi and Hammami (2015) and Agić and Jeremić (2018), which stated that GDP growth has a positive relationship and insignificant effect on NPL.…”

“…The Unemployment rate is the percentage of people's total amount in the labor force that is unemployed (Krugman & Wells, 2021). Mileris (2014), Szarowska (2018), Mazreku et al (2018), and Agić and Jeremić (2018) claimed that the unemployment rate has a significant affects the NPL. When the unemployment rate increased, it will affect the rise of the NPL ratio.…”

Macroeconomic Factors of Non-Performing Loans: The Case of Bosnia and Herzegovina

“…Pašić and Omerbegović-Arapović (2016) investigated macroeconomic factors of non-performing loans in households sector of Federation of Bosnia and Herzegovina and found negative association between GDP growth and NPLs while inflation and unemployment were not significant predictors. Somewhat different results were obtained by Agić and Jeremić (2018) who analyzed macroeconomic and bank-specific factors of NPLs in Bosnia and Herzegovina during the 2006-2016 period. The authors found that rising NPLs are correlated with high unemployment rate, growth of consumer prices, return on assets and credit growth rates, while the effects of the GDP growth, capital adequacy ratio, return on equity and active interest rates are not statistically significant.…”

Determinan Probability of Default Dalam Perhitungan Expected Credit Loss Perbankan

“…Berkaitan dengan variabel kontrol tingkat pengangguran, ketika tingkat pengangguran meningkat, maka akan mempengaruhi kenaikan tingkat default karena meningkatnya angka pengangguran akan memicu turunnya kemampuan masyarakat dalam menyediakan arus kas dan menurunkan kemampuan debitur dalam membayar utang kepada bank (Krugman, 2021). Hasil ini tidak sejalan dengan Mileris (2014), Szarowska (2018), Mazreku et al (2018), dan Agić & Jeremić (2018) menyatakan bahwa tingkat pengangguran berpengaruh signifikan terhadap tingkat default karena ketika tingkat pengangguran meningkat, maka akan mempengaruhi kenaikan tingkat default.…”