Results and Findings
The results and findings of this study is separated into two major
sections. The first of which summarizes the findings based on data
presented in the Introduction, methods introduced in afterwards, as well
as data that has yet been presented (but will be introduced late in this
section). The second section introduces supporting graphics and data
which backs up claims made not only in this section but in previous ones
as well.
Using the data provided in the initial introduction to this paper, as
well as other sources and original findings, a conclusion of the
following impact of high NPL ratios can have on an individual bank’s
lending trends and profitability is below (in no specific order):
- High NPL ratios cause a contraction in bank credit supply.
- Short-term loans are significantly favored over long-term loans.
- Increased risk of bank shutdown or failure.
- Distorted credit allocation; imbalance of credit spread in the bank.
- Decreased number of loaners and customers registering at the bank.
A high NPL ratio also has impacts on the national economy, through data
presented above as well as graphs and logistics presented below, the
impact of high NPL ratios can have on an entire national economy is
given below (in no specific order):
- Drastic decrease in market confidence.
- Significant decrease in total amount of loans given out in the
aftermath.
- A significant contraction in national loan supply.
- Slows economic growth and impacts rate of nominal GDP growth.
- National banks and treasuries have heightened responsibility to not
only support local banks but also actively decrease the high NPL
ratios present.
With the impact of high NPL ratios summarized, this study also found
(from data and experts) that the main impact of national governments
decreasing high NPL ratios has a significant impact on the national
economy—almost always a positive impact for that.
- Economies experience an influx of new credit supply.
- Previously distorted credit allocation becomes undistorted.
- Significant uptick in the rate of credit growth.
- Improved confidence in the overall health of the national economy.
- Significantly improved
The paper found a statistically significant relationship between changed
lending trends of a bank and high NPL ratios. Specifically, banks tended
to decrease the total amount of loans as well as switch types of loans
to make loaning safer for their profits. It is also found that a bank’s
profitability suffers when their NPL ratios increase beyond a point.
Figure 4: Numeric data of NPL ratios for five selected data from 1998 to
2019