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):
  1. High NPL ratios cause a contraction in bank credit supply.
  2. Short-term loans are significantly favored over long-term loans.
  3. Increased risk of bank shutdown or failure.
  4. Distorted credit allocation; imbalance of credit spread in the bank.
  5. 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):
  1. Drastic decrease in market confidence.
  2. Significant decrease in total amount of loans given out in the aftermath.
  3. A significant contraction in national loan supply.
  4. Slows economic growth and impacts rate of nominal GDP growth.
  5. 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.
  1. Economies experience an influx of new credit supply.
  2. Previously distorted credit allocation becomes undistorted.
  3. Significant uptick in the rate of credit growth.
  4. Improved confidence in the overall health of the national economy.
  5. 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