Non-performing loans forbearance – Impact of COVID-19 measures (case of Slovakia)
The 2008 financial crisis opened the eyes of financial markets participants and the financial world was showed up that overlooking the risks related to risky borrowing might have devastating consequences. One of the crucial lessons learned from the last 12 years was that non-performing loans represent a major obstacle to the development of banking sector. The aim of this paper is to focus on the recent forbearance measures adopted by regulatory authorities in light of the outbreak of the pandemics and estimate potential impact of these measures on the NPLs identification and resolution in Slovakia. In the first part we describe the determinants of the correlation of the volume of NPLs and the banking crisis, and the reaction of regulators on the unexpected hit of the financial sector. The second part leverage available data to capture the first possible impacts of these measures on the non-performing exposure of Slovak banks. Limited by the sparse amount of data, we conclude that the most affected sector is the sector of self-employed followed by the households. Surprisingly the non-financial corporations’ sector which had to face the largest cash-flow outages seems not to be seriously affected. Using the breakdown by the type of the loan, the highest increase in the NPLs can be observed for the intermediary loans and the sharpest decrease for the loans for housing purposes other than mortgages.
KEY WORDS: non-performing loans, COVID-19, forbearance