NONPERFORMING LOANS AND FINANCIAL STABILITY – THE CASE OF SERBIA

Velimir Lukić, Svetlana Popović, Irena Janković

DOI Number
https://doi.org/10.22190/FUEO1904349L
First page
349
Last page
364

Abstract


This paper investigates resilience and stability of the Serbian banking sector in the light of deteriorated quality of its credit portfolio since the last world economic crisis. Nonperforming loans became a burning issue across Eastern European region. We used a set of indicators to appraise the magnitude of nonperforming loans’ burden to the banking sector’s soundness. Indicators verify that the Serbian banking sector was robust and solvent throughout crisis. Nonperforming loans were concentrated in nonfinancial corporations’ sector, while households sector performed much better, which influenced remedy measures undertaken. We carried out a comparison with peer countries and reviewed nonperforming loans resolution strategy implemented in Serbia. Our finding is that measures taken helped noticeably in reducing stock of nonperforming loans, with a caveat that reduction might have been too fast and too large so that bounce back effect cannot be excluded. Overall, financial stability has been preserved despite serious threats and without government financial aid. 


Keywords

banking sector, nonperforming loans, crisis management, financial stability

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References


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DOI: https://doi.org/10.22190/FUEO1904349L

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