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Lending Growth, Non-Performing Loans and Loan Losses

Authors: Kvisgaard, Vera; Vale, Bent;

Lending Growth, Non-Performing Loans and Loan Losses

Abstract

At macro level, large loan losses for banks have often been preceded by periods of high lending growth. We analyse at bank level whether high loan growth also leads to more problem loans later on. The analysis is carried out on a panel of Norwegian banks covering the period 1996 – 2016. The applied methodology is similar to the one found in similar studies on Spanish banks as well as on banks in several OECD countries. We find a statistically significant positive relationship between past excessive loan growth at a bank and its amount of problem loans 2 – 3 years ahead. Unlike in the studies of other countries, the effect is not economically significant. Results do not indicate that excessive loan growth will never have any adverse effect at Norwegian banks, as our sample covers a relatively calm period in the Norwegian banking sector. Nevertheless, with a non-linear technique, we do find some indication that banks with much higher lending growth also experience proportionally much higher loan losses.

Country
Norway
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Keywords

VDP::Samfunnsvitenskap: 200::Økonomi: 210, spline model, ddc:330, loan losses, lending growth, dynamic panel model

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
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