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Resolution of non-performing loans is a key determinant of bank credit default losses. This paper analyzes macroeconomic and systematic frailty effects of the default resolution time for a sample of… Click to show full abstract
Resolution of non-performing loans is a key determinant of bank credit default losses. This paper analyzes macroeconomic and systematic frailty effects of the default resolution time for a sample of 17,395 defaulted bank loans in USA, Great Britain, and Canada. We find that frailties have a huge impact on the resolution times. In a representative sample portfolio, median resolution times more than double in a recession when compared to an expansion. This leads to highly skewed distributions of losses and considerable systematic risk of the bank portfolio.
Journal Title: Journal of Banking and Finance
Year Published: 2017
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