Estimation of the determining factors on non-performing loans for the period 2010-2019 using the dynamic panel data method

Abstract

The aim of the research is to measure and analyze the determinants of non-performing bank loans, including banking determinants and external determinants related to the macro economy. assumed that macroeconomic factors have a greater impact than the internal determinants of bad debts in the Iraqi banking sector. The research sample included 30 banks operating in Iraq, whether private or governmental, depending on the banking system in Iraq during the period (2010-2019), and the research relied on The Generalized Method of GMM - Moments for dynamic tablet data in estimating the data of the research sample. The results proved that the parameter of the first slowdown period of banking default is inversely related to the current banking default, as it was shown from the results of the standard analysis with regard to banking variables that there is an inverse relationship for each of the ratio (capital adequacy, interest rate, and the ratio of total credit volume to assets) with Non-performing loans, as for the ratio of liquidity and the ratio of loans to capital to the existence of a positive relationship with non-performing bank loans, as well as, the existence of an inverse relationship between the external macroeconomic variables (exchange rate, unemployment, efficiency of government spending) and the ratio of non-performing loans, with regard to inflation And the gross domestic product, the results proved the existence of a direct relationship for each of them with banking default, and one of the most important recommendations of the research is to strengthen control measures by the monetary authority towards commercial banks to ensure the application of banking safety standards, as well as adherence to the instructions of the Central Bank of Iraq regarding raising capital for the purpose of facing risks, It also enhances the state of transparency between banks, supervisory agencies and customers to know the efficiency and soundness of the financial position of the banks.