Pre- Pandemic Evidence from Conventional Banks in Malaysia on the Causes of Bank Specific Factors of Defaulting Loans

Abstract

This article examines Malaysian commercial bank non-performing loan causes. This study examines bank and macroeconomic factors causing non-performing loans. Eight Malaysian commercial banks are used in this study. Data from 2009-2018 annual report and FitchConnect database. Panel data was used to analyze the data. All determinants were regressed against non-performing loans using STATA 14. This study found that capitalization negatively correlated with non-performing loans and the real effective exchange rate positively correlated. This report emphasizes key non-performing loan factors for banks and financial organizations. The real effective exchange rate, a novel macroeconomic variable, is crucial for non-performing loans in this study. Thus, this study adds a variable to the model to determine what causes non-performing loans.