ANALYSIS OF THE FACTORS AFFECTING NON-PERFORMING LOANS IN THE COMMERCIAL BANKING SECTOR

The lending process, which is one of the primary activities of commercial banks, has become more complicated with a potential to harm both banking and real sectors because of the domino effect of non-performing loans. Given the importance of non-performing loans for the economy, this empirical study explored, the drivers of non-performing loans of 25 commercial banks which operated in the Turkish banking sector between 2008 and 2015. By employing a balanced static panel data analysis method, the study examined the micro (bank-specific) and macro (economy-specific) variables causing the non-performing loans. The findings identified inflation, unemployment rate, real exchange rate, the growth rate of GNP, the growth rate of GNP in the Eurozone, and the composite index of BIST as macro variables that significantly influence the non-performing loans in the Turkish commercial banks in that period. As to micro variables, a significant influence is also predicted from real effective interest rate, capital adequacy ratio, the share of consumer loans in total loans, the credit conversion rate of deposits (loans to deposits ratio), personnal expenditure to assets ratio and an individual bank’s assets/sector’s total assets (as a size indicator