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Do retail-oriented banks have less non-performing loans?

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  • Farnè, Matteo
  • Vouldis, Angelos

Abstract

We present empirical evidence that euro area banks following a retail-oriented financial intermediation business model exhibit a lower level of non-performing loans in their loan portfolio compared to the banks involved to a larger degree in market activities. This result is confirmed separately for the subsets of banks operating in distress and non-distress countries. We primarily utilise a business model classification that is underpinned by granular confidential supervisory data collected in the context of the EU Single Supervisory Mechanism. We control for macroeconomic developments, a number of bank-specific determinants and endogeneity, using an instrumental variables approach. Our results remain robust to the application of a wide range of specifications and estimation methods.

Suggested Citation

  • Farnè, Matteo & Vouldis, Angelos, 2024. "Do retail-oriented banks have less non-performing loans?," The Journal of Economic Asymmetries, Elsevier, vol. 29(C).
    • Handle: RePEc:eee:joecas:v:29:y:2024:i:c:s1703494924000070
    DOI: 10.1016/j.jeca.2024.e00358
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