Loan renegotiation and the long-term impact on total factor productivity
When a loan is close to becoming non-performing, banks have stronger incentives to renegotiate it in favourable conditions for the borrower (loan forbearance) rather than for recognising and resolving the non-performing loan. At the aggregated level and looking at borrowers (non-financial corporatio...
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| Format: | Article |
| Language: | English |
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Elsevier
2022-12-01
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| Series: | Latin American Journal of Central Banking |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S266614382200028X |
| _version_ | 1811297999737847808 |
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| author | Antonio Sánchez Serrano |
| author_facet | Antonio Sánchez Serrano |
| author_sort | Antonio Sánchez Serrano |
| collection | DOAJ |
| description | When a loan is close to becoming non-performing, banks have stronger incentives to renegotiate it in favourable conditions for the borrower (loan forbearance) rather than for recognising and resolving the non-performing loan. At the aggregated level and looking at borrowers (non-financial corporations), the preference for loan renegotiation may affect total factor productivity and aggregate productivity growth, as new entrants, typically using technologies that are more advanced, may be crowded out from bank funding by incumbent non-financial corporations (this would particularly be the case in the absence of well-developed financial markets). The empirical analysis finds that a wider use of loan renegotiation, seen through lower values of provisions to total loans, has a negative effect on the change of total factor productivity (in addition to the influence of consumption growth). These results provide useful insights when considering the resolution of non-performing loans and the long-term consequences on the real economy. |
| first_indexed | 2024-04-13T06:13:17Z |
| format | Article |
| id | doaj.art-44174176ba7e4adb9341065405abd981 |
| institution | Directory Open Access Journal |
| issn | 2666-1438 |
| language | English |
| last_indexed | 2024-04-13T06:13:17Z |
| publishDate | 2022-12-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Latin American Journal of Central Banking |
| spelling | doaj.art-44174176ba7e4adb9341065405abd9812022-12-22T02:58:56ZengElsevierLatin American Journal of Central Banking2666-14382022-12-0134100074Loan renegotiation and the long-term impact on total factor productivityAntonio Sánchez Serrano0Corresponding author: European Systemic Risk Board, Sonnemannstrasse 20, 60314 Frankfurt am Main, Germany; European Systemic Risk Board, Frankfurt am Main, GermanyWhen a loan is close to becoming non-performing, banks have stronger incentives to renegotiate it in favourable conditions for the borrower (loan forbearance) rather than for recognising and resolving the non-performing loan. At the aggregated level and looking at borrowers (non-financial corporations), the preference for loan renegotiation may affect total factor productivity and aggregate productivity growth, as new entrants, typically using technologies that are more advanced, may be crowded out from bank funding by incumbent non-financial corporations (this would particularly be the case in the absence of well-developed financial markets). The empirical analysis finds that a wider use of loan renegotiation, seen through lower values of provisions to total loans, has a negative effect on the change of total factor productivity (in addition to the influence of consumption growth). These results provide useful insights when considering the resolution of non-performing loans and the long-term consequences on the real economy.http://www.sciencedirect.com/science/article/pii/S266614382200028XD24G21G23G32 |
| spellingShingle | Antonio Sánchez Serrano Loan renegotiation and the long-term impact on total factor productivity Latin American Journal of Central Banking D24 G21 G23 G32 |
| title | Loan renegotiation and the long-term impact on total factor productivity |
| title_full | Loan renegotiation and the long-term impact on total factor productivity |
| title_fullStr | Loan renegotiation and the long-term impact on total factor productivity |
| title_full_unstemmed | Loan renegotiation and the long-term impact on total factor productivity |
| title_short | Loan renegotiation and the long-term impact on total factor productivity |
| title_sort | loan renegotiation and the long term impact on total factor productivity |
| topic | D24 G21 G23 G32 |
| url | http://www.sciencedirect.com/science/article/pii/S266614382200028X |
| work_keys_str_mv | AT antoniosanchezserrano loanrenegotiationandthelongtermimpactontotalfactorproductivity |