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Non-Performing Loans in the ECCU

Determinants and Macroeconomic Impact

Non-Performing Loans in the ECCU by Kimberly Beaton
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This paper assesses the determinants of NPLs in the Eastern Caribbean Currency Union(ECCU) and whether a deterioration in asset quality may result in negative feedbackeffects from the banking system to economic activity. The results suggest that thedeterioration in asset quality can be attributed to both macroeconomic and bank-specificfactors. Banks with stronger profitability and lower exposure to the construction sectorand household loans tend to have lower NPLs. Further, some evidence indicates thatforeign owned banks systematically have lower NPLs than domestic banks, pointing to thepresence of important differences across bank practices with an impact on asset quality.Finally, the results emphasize the strength of macrofinancial feedback loops in the ECCU.
International Monetary Fund; November 2016
33 pages; ISBN 9781475555738
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Title: Non-Performing Loans in the ECCU
Author: Kimberly Beaton; Alla Myrvoda; Shernnel Thompson