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Non-Performing Loans Development in Romania

Author

Listed:
  • Ilie Răscolean

    (University of Petroșani, Romania)

  • Sorin-Iuliu Mangu

    (University of Petroșani, Romania)

Abstract

Bad loans are essentially loans with arrears of 90 days or more, and the criterion of 90 days is the most common practice in different countries to determine indicators on the bad in lending. Credit risk is one of the most important financial risks facing the banking system is assumed by all credit institutions and may cause serious problems so that bank and the whole system if risk exposure is substantial. From this point of view, the most important function of bank management is to control the quality of the loan portfolio. This is because the poor quality of loans is the leading cause of bankruptcy. In accordance with the central bank, credit institutions are obliged to protect the bank's capital and the deposits of individuals and legal entities and to cover any loans that present uncertainties in recovery, to determine and utilize prudential value adjustments. The central bank aims NPL development using aggregated indicators on credit institutions. Conclusions are presented on developments and trends in non-performing loans in the portfolio of credit institutions in Romania.

Suggested Citation

  • Ilie Răscolean & Sorin-Iuliu Mangu, 2014. "Non-Performing Loans Development in Romania," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 14(2), pages 217-224.
    • Handle: RePEc:pet:annals:v:14:y:2014:i:2:p:217-224
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    More about this item

    Keywords

    performing loans; credit risk; financial performance; debt service; judicial; aggregated indicators on credit institutions; outstanding receivables; receivables impaired; NPL; leverage; classification category;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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