AEIR 2022

Nonperforming Loans in Asia and Europe—Causes, Impacts, and Resolution Strategies

The volume highlights the need for decisive and comprehensive policy action to help manage NPLs swiftly. It explores the legal and economic conditions conducive to NPL resolution, the role of asset management companies, the potential of technological solutions, and the importance of regional financial cooperation. It provides insights to help policy makers chart a course through the financial and economic fallout of the coronavirus disease (COVID-19) pandemic to recovery and sustained financial stability in Asia, Europe, and beyond. The publication is a collaborative project of the Asian Development Bank and the European Central Bank.

Contents:

Key Messages and Overview

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    PART 1: Summary of Nonperforming Loan Trends and Lessons from Three Decades of Crisis Resolution in Asia and Europe
    Trends of Nonperforming Loans in Asia and Europe

    • Introduction
    • Developments in Asia
    • Developments in the Euro Area
    • Conclusions
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    PART 1: Summary of Nonperforming Loan Trends and Lessons from Three Decades of Crisis Resolution in Asia and Europe
    Lessons from Three Decades of Banking Crisis Resolution: Overstating Moral Hazard?

    • Introduction
    • Identification, Treatment, Causes, and Consequences of Nonperforming Loans
    • Systemic Bank Resolution Standards and Moral Hazard
    • The Asian Financial Crisis and Bank Restructuring
    • Bank Rescue Case Studies from the Global Financial Crisis
    • The Eurozone Debt Crisis and Banking Sector Restructuring
    • Conclusion
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    PART 2: Empirical Analyses of the Macrofinancial Implications of Nonperforming Loans in Asia and Europe
    Assessing Macrofinancial Implications and Resolution Policies of Nonperforming Loans

    • Introduction
    • Literature Review
    • Nonperforming Loan Data and Reduction Episodes
    • Determinants of Sharp Movements in Nonperforming Loan Ratios
    • Evaluating the Macrofinancial Effects of Nonperforming Loan Reduction
    • Macrofinancial Effects of Nonperforming Loans in Asia
    • Conclusion
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    PART 2: Empirical Analyses of the Macrofinancial Implications of Nonperforming Loans in Asia and Europe
    Do Nonperforming Loans Matter for Bank Lending and the Business Cycle in Euro Area Countries?

    • Introduction
    • Empirical Approach and Data
    • Empirical Findings
    • Conclusion
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    PART 3: Country Case Studies on Nonperforming Loan Resolution in Asia and Europe
    Country Case Studies on Resolving Problem Loans in Asia: Crises, Policies, and Institutions

    • Introduction
    • Literature Review
    • Case Studies on Asian Nonperforming Loan Resolution
    • Data and Empirical Approach
    • Results
    • Conclusion
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    PART 3: Country Case Studies on Nonperforming Loan Resolution in Asia and Europe
    Country Case Studies on Resolving Problem Loans in Europe: Crises, Policies, and Institutions

    • Introduction
    • National Nonperforming Loan Resolution Frameworks
    • Case Studies of Resolution Strategies
    • Impact of National Reforms in the Euro Area
    • Conclusions and Implications for Emerging Asia
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    PART 4: Policy Strategies for Nonperforming Loan Resolution and Market Development in Asia and Europe
    Resolution of Nonperforming Loans in the Euro Area

    • Introduction: The Nonperforming Loan Problem in the Euro Area
    • Why Was Nonperforming Loan Resolution So Slow in the Euro Area?
    • Elements of a Comprehensive Solution
    • The Benefits of European Regional Cooperation
    • Conclusions
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    PART 4: Policy Strategies for Nonperforming Loan Resolution and Market Development in Asia and Europe
    Strategies for Developing Asia’s Nonperforming Loan Markets and Resolution Mechanisms

    • Introduction
    • Nonperforming Loan Markets in Asia and the Pacific
    • Impediments to Nonperforming Loan Market Development
    • Case Studies of Developing Nonperforming Loan Markets in Asia
    • A Strategy to Develop Nonperforming Loan Markets and Resolution Frameworks
    • Conclusion
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