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Year 2020, Proceedings of The Third Economics, Business And Organization Research (EBOR) Conference, 33 - 49, 31.12.2020

Abstract

References

  • Angelini, P., Enria, A., Neri, S., Panetta, F. & Quagliariello, M. (2010). ́́ʹPro-Cyclicality of Capital Regulation: Is it a Problem? How to Fix it?´, Bank of Italy Occasional Paper, 74, dx.doi.org/10.2139/ssrn.1721563.
  • Basel Committee on Banking Supervision (2014, October). Basel III: the net stable funding ratio. Bhansali,V, Gingrich R. & Longstaff, F.A. (2018). ʹSystematic credit risk: W hat is the m arket telling us?`, Financial Analysts Journal, 64(4), p. 1.
  • Central Statistical Office (2020). Macroeconomics indicators. Available at: https://stat.gov.pl/wskazniki-makroekonomiczne/ (Accessed: 20 November 2020).
  • ECB (2018). Asset Quality Review. Available at: /www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.assetqualityreviewmanual201806.en.pdf (Accessed: 2 December 2020).
  • ECB (2020a). What are non-performing loans (NPLs)?, Available at: https://www.ecb.europa.eu/explainers/tell-me/html/npl.en.html. (Accessed: 20 November 2020).
  • ECB (2020b). Consolidated Banking Data. Calculations by Commission services (DG FISMA), Available at: https://www.ecb.europa.eu/stats/supervisory_prudential_statistics/consolidated_banking_data/html/index.en.html (Accessed: 20 November 2020).
  • European Commission (2019a). Council conclusions on Action plan to tackle non-performing loans in Europe. Available at: https://www.consilium.europa.eu/en/press/press-releases/2017/07/11/conclusions-non-performing-loans/ (Accessed: 20 November 2020).
  • European Commission (2019b). Fourth Progress Report on the reduction of non-performing loans and further risk reduction in the Banking Union, Brussels, COM(2019)278 final.
  • European Commission Services (2019). Monitoring Report on Risk Reduction Indicators, European Working Group meeting. Available at: https://www.consilium.europa.eu/media/37029/joint-risk-reduction-monitoring-report-to-eg_november-2018.pdf, pp. 20-45 (Accessed: 20 November 2020).
  • European Commission Services (2020). Report of the FSC Subgroup on Non-Performing Loans. European Working Group meeting, Available at: http://data.consilium.europa.eu/doc/document/ST-9854-2017-INIT/en/pdf (Accessed: 20 November 2020).
  • European Council (2017). Council conclusions on Action plan to tackle non-performing loans in Europe. Available at: http://www.consilium.europa.eu/en/press/press-releases/2017/07/11/conclusions-non-performing-loans/ (Accessed: 3 December 2020).
  • European Parliament (2013). Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012.
  • European Parliament (2019). Regulation (EU) 630/2019 of the European Parliament and of the Council of 17 April 2019 amending Regulation (EU) No 575/2013 as regards minimum loss coverage for non-performing exposures.
  • Frye, J. (2000). ʹDepressing Recoveries`, Risk, November, pp. 108-111.
  • Generst, B. & Brie, L. (2013). Basel II IRB Risk Weight Functions. Demonstration and Analysis. Available at SSRN: https://ssrn.com/abstract=2578936 or http://dx.doi.org/10.2139/ssrn.2578936 (Accessed: 3 December 2020).
  • Głogowski A. (2008). ʹMacoeconomic determinants of Polih bank`s loan losses – results of a panel data study`, NBP WP, 53, Warsaw.
  • IMF (2003). Financial Soundness Indicators – Background Paper, Prepared by the Staff of the Monetary and Financial Systems and Statistics Departments. Approved by Carol S. Carson and Stefan Ingves, p. 49. Available at: https://www.imf.org/external/np/sta/fsi/eng/2003/051403bp.pdf (Accessed: 20 November 2020).
  • Jakubik, P. & Schmeider, Ch. (2008). ʹStress Testing Credit Risk: Is the Czech Republic Different from Germany`, Working Paper, 9, Czech National Bank, Reserach Department, p. 11. Kufel, T. (2011). Ekonometria (Econometrics), PWN, Warsaw.
  • Maggi, B. & Guida, M. (2011). ʹModelling non-performing loans probability in the commercial banking system: efficiency and effectiveness related to credit risk in Italy`, Empirical Economics, 41, p. 269-291.
  • Matthewes, K., Guo, J. & Zhang, N. (2007). ʹRational inefficiency and non-performing loans in Chinese banking: a non parametric bootstrapping approach`, Cardiff Economic Working Papers, (E2007/5), U.K: Cardiff University.
  • Matuszyk, A. (2017). Ryzyko kredytowe (Credit risk), in Iwanicz-Drozdowska M. (eds.) Zarządzanie ryzykiem bankowym (Credit risk management), Warszawa: Poltext, pp. 19-210.
  • NBP (2020). Monetary and financial statistics, Available at: https://www.nbp.pl/homen.aspx?f=/en/statystyka/monetary-and-financial-statistics.html (Accessed: 20 November 2020).
  • OECD.stat. (2020). OECD Internet databases, http://stats.oecd.org. (Accessed: 20 November 2020).
  • Pastor, J. M. (2002). ʹCredit risk and efficiency in the European banking system: a three-stage analysis`. Appl Financ Econ, (12), pp. 895–911.
  • Pastor, J. M. & Serrano, L. (2005). ʹEfficiency, endogenous and exogenous credit risk in the banking systems of the Euro area`. Appl Financ Econ 15(9), pp. 631–649.
  • Piłatowska, M. (2003). Modelowanie niestacjonarnych procesów ekonomicznych. Studium metodologiczne, (Modelling of Non-Stationary Economic Processes. A Methodological Study): Uniwersytet M. Kopernika, Toruń.
  • Virolainen, K. (2004). Macro Stress Testing with a Macoroeconomic Credit Risk Model for Finland, Bank of Finland Paper, 18, October, p. 10.
  • Yiping Q. (2008). ʹMacro Economic Factors and Probability of Default, France`, European Journal of Economics, 13, p. 4.

CHANGES IN THE QUALITY OF THE LOAN PORTFOLIO IN THE POLISH BANKING SYSTEM

Year 2020, Proceedings of The Third Economics, Business And Organization Research (EBOR) Conference, 33 - 49, 31.12.2020

Abstract

The aim of this study is to examine the impact of changes in market conditions, the financial standing of enterprises and banks` capital requirements on the quality of the corporate loan portfolio in the Polish banking sector before and during COVID-19. The methodology of changes in the quality of the loans portfolio (QLP) corresponds to the methodologies used by central banks, e.g. by National Bank of Poland (NBP) and International Monetary Fund (IMF). This research applied Vector Error Correction Model (VECM) and also impulse response functions and decompositions of variables. This research used quarterly time-series data during 2009–2020 and a simple moving average filter (SMA). The empirical results of the VECM confirmed the importance of indicators of revenues, economic development (GDP), investments and costs of obtaining revenues on the part of corporations and total own funds on the part of banks. Evaluation of the EC1 indicates that the strongest correction of the deviation from long-term equilibrium occurs in the case of the revenues from the overall activity of corporations (ROAC), GDP equations and gross fixed capital formation (GFCF) and costs of obtaining revenues from the overall activity of corporations (CROAC) equations. Results of the analysis of the impulse function and variance decomposition confirmed the importance of market indicators and the financial situation of companies in explaining changes in the QLP. Analysis of the QLP response to impulses from the explanatory variables confirmed that the strength of the influence of these impulses increased over time. In the 4th quarter, the strongest QLP responses to impulses came from: CPI, ROAC and GDP. Nevertheless, in the 19–20th quarter (5th year) of the forecast, the QLP response was the strongest, including apparently against ROAC and CPI. Results of QLP decomposition indicate that in the 1st quarter these changes are fully accounted for with their own forecast errors. In the 4th – 20th quarter, their own changes lose significance and mainly by CPI, ROAC and GDP grow in significance, with less importance of other variables. The added value of the analysis is that QLP research confirmed the pro-cyclical nature of lending activity in Poland in the verified years. The empirical results may be of practical use by banks in modeling the dynamics and quality of the corporate loan portfolio. These findings provide insights for future asset quality reviews (AQR) required by European supervision.

References

  • Angelini, P., Enria, A., Neri, S., Panetta, F. & Quagliariello, M. (2010). ́́ʹPro-Cyclicality of Capital Regulation: Is it a Problem? How to Fix it?´, Bank of Italy Occasional Paper, 74, dx.doi.org/10.2139/ssrn.1721563.
  • Basel Committee on Banking Supervision (2014, October). Basel III: the net stable funding ratio. Bhansali,V, Gingrich R. & Longstaff, F.A. (2018). ʹSystematic credit risk: W hat is the m arket telling us?`, Financial Analysts Journal, 64(4), p. 1.
  • Central Statistical Office (2020). Macroeconomics indicators. Available at: https://stat.gov.pl/wskazniki-makroekonomiczne/ (Accessed: 20 November 2020).
  • ECB (2018). Asset Quality Review. Available at: /www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.assetqualityreviewmanual201806.en.pdf (Accessed: 2 December 2020).
  • ECB (2020a). What are non-performing loans (NPLs)?, Available at: https://www.ecb.europa.eu/explainers/tell-me/html/npl.en.html. (Accessed: 20 November 2020).
  • ECB (2020b). Consolidated Banking Data. Calculations by Commission services (DG FISMA), Available at: https://www.ecb.europa.eu/stats/supervisory_prudential_statistics/consolidated_banking_data/html/index.en.html (Accessed: 20 November 2020).
  • European Commission (2019a). Council conclusions on Action plan to tackle non-performing loans in Europe. Available at: https://www.consilium.europa.eu/en/press/press-releases/2017/07/11/conclusions-non-performing-loans/ (Accessed: 20 November 2020).
  • European Commission (2019b). Fourth Progress Report on the reduction of non-performing loans and further risk reduction in the Banking Union, Brussels, COM(2019)278 final.
  • European Commission Services (2019). Monitoring Report on Risk Reduction Indicators, European Working Group meeting. Available at: https://www.consilium.europa.eu/media/37029/joint-risk-reduction-monitoring-report-to-eg_november-2018.pdf, pp. 20-45 (Accessed: 20 November 2020).
  • European Commission Services (2020). Report of the FSC Subgroup on Non-Performing Loans. European Working Group meeting, Available at: http://data.consilium.europa.eu/doc/document/ST-9854-2017-INIT/en/pdf (Accessed: 20 November 2020).
  • European Council (2017). Council conclusions on Action plan to tackle non-performing loans in Europe. Available at: http://www.consilium.europa.eu/en/press/press-releases/2017/07/11/conclusions-non-performing-loans/ (Accessed: 3 December 2020).
  • European Parliament (2013). Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012.
  • European Parliament (2019). Regulation (EU) 630/2019 of the European Parliament and of the Council of 17 April 2019 amending Regulation (EU) No 575/2013 as regards minimum loss coverage for non-performing exposures.
  • Frye, J. (2000). ʹDepressing Recoveries`, Risk, November, pp. 108-111.
  • Generst, B. & Brie, L. (2013). Basel II IRB Risk Weight Functions. Demonstration and Analysis. Available at SSRN: https://ssrn.com/abstract=2578936 or http://dx.doi.org/10.2139/ssrn.2578936 (Accessed: 3 December 2020).
  • Głogowski A. (2008). ʹMacoeconomic determinants of Polih bank`s loan losses – results of a panel data study`, NBP WP, 53, Warsaw.
  • IMF (2003). Financial Soundness Indicators – Background Paper, Prepared by the Staff of the Monetary and Financial Systems and Statistics Departments. Approved by Carol S. Carson and Stefan Ingves, p. 49. Available at: https://www.imf.org/external/np/sta/fsi/eng/2003/051403bp.pdf (Accessed: 20 November 2020).
  • Jakubik, P. & Schmeider, Ch. (2008). ʹStress Testing Credit Risk: Is the Czech Republic Different from Germany`, Working Paper, 9, Czech National Bank, Reserach Department, p. 11. Kufel, T. (2011). Ekonometria (Econometrics), PWN, Warsaw.
  • Maggi, B. & Guida, M. (2011). ʹModelling non-performing loans probability in the commercial banking system: efficiency and effectiveness related to credit risk in Italy`, Empirical Economics, 41, p. 269-291.
  • Matthewes, K., Guo, J. & Zhang, N. (2007). ʹRational inefficiency and non-performing loans in Chinese banking: a non parametric bootstrapping approach`, Cardiff Economic Working Papers, (E2007/5), U.K: Cardiff University.
  • Matuszyk, A. (2017). Ryzyko kredytowe (Credit risk), in Iwanicz-Drozdowska M. (eds.) Zarządzanie ryzykiem bankowym (Credit risk management), Warszawa: Poltext, pp. 19-210.
  • NBP (2020). Monetary and financial statistics, Available at: https://www.nbp.pl/homen.aspx?f=/en/statystyka/monetary-and-financial-statistics.html (Accessed: 20 November 2020).
  • OECD.stat. (2020). OECD Internet databases, http://stats.oecd.org. (Accessed: 20 November 2020).
  • Pastor, J. M. (2002). ʹCredit risk and efficiency in the European banking system: a three-stage analysis`. Appl Financ Econ, (12), pp. 895–911.
  • Pastor, J. M. & Serrano, L. (2005). ʹEfficiency, endogenous and exogenous credit risk in the banking systems of the Euro area`. Appl Financ Econ 15(9), pp. 631–649.
  • Piłatowska, M. (2003). Modelowanie niestacjonarnych procesów ekonomicznych. Studium metodologiczne, (Modelling of Non-Stationary Economic Processes. A Methodological Study): Uniwersytet M. Kopernika, Toruń.
  • Virolainen, K. (2004). Macro Stress Testing with a Macoroeconomic Credit Risk Model for Finland, Bank of Finland Paper, 18, October, p. 10.
  • Yiping Q. (2008). ʹMacro Economic Factors and Probability of Default, France`, European Journal of Economics, 13, p. 4.
There are 28 citations in total.

Details

Primary Language English
Subjects Business Administration
Journal Section Conference Full Paper Proceedings
Authors

Aneta Kosztownıak This is me

Publication Date December 31, 2020
Published in Issue Year 2020 Proceedings of The Third Economics, Business And Organization Research (EBOR) Conference

Cite

APA Kosztownıak, A. (2020). CHANGES IN THE QUALITY OF THE LOAN PORTFOLIO IN THE POLISH BANKING SYSTEM. Economics Business and Organization Research33-49.