Credit risk determinants in the Bulgarian banking system and the Greek twin crises

  • Sofoklis D. Vogiazas, Eftychia Nikolaidou
  • Published 2011

Abstract

This paper aims to investigate the credit determina nts in the Bulgarian banking sector by means of time series mo delling approach. It is motivated by the hypothesis that macroeconomi c cyclical indicators, monetary aggregates, interest rates, fi nancial markets’ and bank-specific variables have a role to play on the non-performing loans in the Bulgarian banking system. Using monthl y series that span from January 2001 to December 2010, we provide evid ence based on data that covers both the booming period and the recent global financial turmoil. Given the significant penetration of the G reek banks in the Bulgarian financial system, the novelty of the pape r is the introduction of data that proxy the Greek debt cris is and the ensuing Greek banks’ financial distress. Thus, we investiga te the impact of the global financial crisis and the subsequent Gree k crisis on the Bulgarian non-performing loans. Findings indicate t hat the macroeconomic and financial markets’ variables, spe cifically the unemployment rate, the construction index, the indu strial production index and the real effective exchange rate jointly with the credit growth and the global financial crisis influence th e quality of the Bulgarian banks’ assets. Contrary to the expectatio ns, there is no evidence supportive to the hypothesis of linking Gr eek-specific indicators to the quality of the Bulgarian loan por tfolio.

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Cite this paper

@inproceedings{Vogiazas2011CreditRD, title={Credit risk determinants in the Bulgarian banking system and the Greek twin crises}, author={Sofoklis D. Vogiazas and Eftychia Nikolaidou}, year={2011} }