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The Impact of Non-Performing Exposures on Ireland’s Economic Growth

McCormack, Laura (2020) The Impact of Non-Performing Exposures on Ireland’s Economic Growth. Masters thesis, Dublin, National College of Ireland.

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Abstract

The financial crisis of 2008 saw non-performing exposures rise exponentially in Irish banks. It is well documented that there was insufficient regulatory framework in place both at a national and European level to provide resolution guidance, which resulted in the accumulation of NPEs in the years after the crisis. New regulation and capital requirements proposed in 2012 resulted in banks being forced to address their NPEs. In the last number of years Ireland’s banks have been reducing their NPEs to comply with the new guidelines and release their capital held against the NPEs for new business to stimulate economic growth. The aim of this research is to determine to what extent NPEs impact on the economy.

This study examined the relationship between NPEs as a predictor of economic growth in Ireland, using GNI as a proxy. The total NPE includes data from four of Ireland’s “home grown” banks. The quantitative design is cross sectional, and data collected spans from 2000 – 2019. The results showed a strong negative correlation between NPEs and economic growth. Regression analysis showed that 73.4% of the variation in GNI growth can be explained by NPE growth. The conclusion of this study is that NPEs are seen as a vulnerability to the banking system. Removing NPEs from the banks’ balance sheets will prevent them from impeding on economic growth.

Item Type: Thesis (Masters)
Subjects: H Social Sciences > HG Finance > Banking
H Social Sciences > HG Finance > Credit. Debt. Loans.
H Social Sciences > HB Economic Theory > Business Cycles. Economic Fluctuations
Divisions: School of Business > Master of Science in Finance
Depositing User: Dan English
Date Deposited: 16 Feb 2021 10:04
Last Modified: 16 Feb 2021 10:04
URI: http://norma.ncirl.ie/id/eprint/4766

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