Country's Macroeconomic Determinants Predicting the Non-Performing Loans in Commercial Banking System

The research was directed towards the problem of non-performing loans in commercial banking systems of EU-28 countries. Analyzing the period of 2008-2017 years different stages of business cycle were involved of EU countries and their relative differences of economic development were considered. The EU-28 countries were grouped into four clusters analyzing the impact of macroeconomic indicators on the non-performing loans in banking systems. The set of macroeconomic variables was compound that are important determinants of non-performing loans in commercial banks. The statistical classification models were developed that are able determine the low, high or very high non-performing loans class of a country considering its macroeconomic condition with 85.71-100 % accuracy. Using the results of this research, the commercial banks can evaluate the relative riskiness of EU countries to have high proportion of non-performing loans financing its private sector. The implemented statistical analysis and modelling allow understand the typical macroeconomic peculiarities of high debtors' insolvency and the exceptions. Together with the estimated general consistent patterns, the individual features of every country that in current decade met the problem of high non-performing loans were characterized. (C) 2020 Ricardas Mileris.