A non-performing commercial bank loan is a loan in which the borrower has defaulted or has not made any scheduled loan payments for 90 days or more. The NPL ratio of a bank is a percentage measure of loans already at or at risk of becoming non-performing out of the total amount of loans at the bank. As research suggests, an excessively high NPL ratio causes bank to limit their credit supply to borrowers, often causing a credit supply contract ion in the immediate aftermath. Banks also risk profit loss and even bankruptcy if no measures are taken to reduce high levels of NPL ratios. At the macroeconomic level, countries with economies characterized by banks with high NPL-ratios often experience sluggish economic growth, a dramatic decrease in market confidence, increased distortion of credit allocation, sustained or increased demand of loans from borrowers, and a large contraction in available credit supply. To that end, both bank administrations as well as national governments take measures to ensure NPL ratios are kept at healthy levels. However, not all instances of high NPL ratios in modern economic history are addressed properly, and many of the NPL ratio crisis are accompanied by recessional periods in the economy. At the start of 2015, there were 33 countries with an NPL ratio of above 10%. Out of those 33 countries, 20 had an NPL ratio of over 15% and 11 had an NPL ratio of over 20% (refer to Figure 1 below).

Figure 1: All countries with an NPL ratio of 10% or higher as of the start of 2015