Non-performing bank loans: concept, causes and methods of measurement

Abstract

Non-performing bank loans represent a serious problem facing banks, as they lead to the freezing of an important part of their resources as a result of the inability of borrowing clients to pay their debts in installments, and then exposing the bank to losses that exceed the return on the alternative opportunity for investment, in addition to achieving real losses represented in the destruction of these loans and their accessories. There are significant negative effects on the financial structure of the bank in case of an exacerbation of these non-performing loans and the reluctance of debtors to pay what they owe of the principal amount in addition to the collected interests. Also, the share price is negatively affected as a result of the bank's inability to achieve the necessary profits that are commensurate with the size of the credit portfolio