METHODS OF MANAGING AND SOLVING PROBLEM LOANS IN BANKS

Abstract

During the 2007 financial crisis, many banks with a high incidence of non-performing loans (NPLs) encountered a cessation of their capital sources, largely due to poor management practices. Substantial amounts of NPLs indicate not only deficiencies in management methods but also a shortage of capital. Additionally, elevated NPL levels have adversely impacted bank lending activities, raising concerns among bank officers and managers about the future stability of the entire banking system. This study has a dual purpose: firstly, to present various NPL management methods documented in the literature, and secondly, to distinctly differentiate between post-crisis (ex-post) and preventive (ex-ante) NPL management. This paper consolidates recommendations from various researchers on effective strategies to manage and mitigate NPLs across different banking systems worldwide. The goal is that by evaluating these methods, banks will be better equipped to handle NPL issues.