Literature Review
The topic of high NPL ratios in national economies has been the focus of
many research projects across the world in recent years. The
relationship between NPL ratios and the overall health of a national
economy is well-established; a meta-analysis by a team of researchers in
2019 led by Professor Shihadeh, Gamage, and Hannon clearly showed the
relationship between the increasing NPL ratios in select countries and
the impact they had. In addition to that study, multiple studies
conducted at universities around the world point to the fact that a high
NPL ratio is a primary indicator for bank failure. If taken at the
macroscopic view, a national economy that has a high NPL amount when
compared to the total loan or even nominal GDP has been shown through
research to indicate a weaker economy that is at greater risk to a
recession than normal economies.