Dynamics of non-performing loans in the Turkish banking sector by an ownership breakdown: The impact of the global crisis

- The global crisis triggered non-performing loans and this posed risks to financial stability.
- The crisis also challenged Turkish banks and created mounting risks due to higher non-performing loans, which presumably affected ownership categories unevenly.
- This paper explores the impact of the global crisis on non-performing loans and shows that the crisis affected non-performing loan dynamics asymmetrically across banks.
- This implies that policy effectiveness on non-performing loans depends on ownership.
- This should prompt policymakers to take ownership into account as financial-stability-seeking macroprudential policies may have different impacts across banks.

This paper explores the impact of the global crisis on the dynamics of non-performing loans in the Turkish banking sector by ownership. Estimation results suggest that the crisis affected these dynamics differently across banks, which implies that policy implications are uneven. This has important consequences regarding the effectiveness of monetary and the macroprudential policy, which prompt policymakers to consider ownership in policy design. To enhance policy effectiveness, adding ownership-specific explanatory variables may enable better representation of the non-performing loan dynamics. A vintage loan analysis may also help by allowing policymakers to directly identify the loan type, which generates non-performing loans.