Determinants of non-performing loans: Can national asset management companies help to alleviate the problems?

Using a novel dataset I examine to what extent the introduction of national Asset Management Companies (AMCs) impacts the effects of bank-specific and macroeconomic determinants of the NPLs ratio for European countries. This study provides evidence on how national AMCs help to alleviate the level of the NPL ratio in countries with high level of non-viable exposures. The results of the dynamic panel data models show that the NPL ratio is lower and less persistent for banks in countries with national AMC since banks are able to clean their balance sheet with lower losses when market prices of NPL are depressed. For countries with national AMC in general the influence of bank-specific factors is lower than during normal conditions. In the case of macroeconomic factors, the results on the size and direction of the impact are mixed. However, these factors remain the key determinants with the unemployment and the lending rate being the leading indicators.