How corporate banking institutions manage non-performing loans: Case study on BNP Paribas’ approach to credit risk management

• Autor(a) principal: Figueiredo, Mateus Andrade Lima Nascimento de
• Data de Publicação: 2023
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/30754
• topic: Non-performing loans; Non-performing exposure; BNP Paribas; Risk management; Basel III; Crédito vencido; Crédito não produtivo; Gestão do risco

The following dissertation delves into the intricacies of BNP Paribas' approach to managing non-performing loans (NPLs), offering a multi-layered perspective on the bank's internal practices. The study highlights the distinctive approaches of BNP Paribas' risk-aware management strategy, which resulted in a low NPL-to-loan ratio and a high loan loss reserve-to-NPL ratio, positioning the bank favorably compared to its peers. A significant emphasis is placed on the role of NPLs in affecting economic growth. Despite a subprime post-crisis reduction in NPLs, they continuously pose a substantial threat to banks and the broader European economy. NPLs diminish banks' profitability as resources are allocated to cover expected losses (provisions), reducing funds available for lending to households and companies, thereby hampering growth and job creation. Furthermore, the study acknowledges the adoption of the Basel III reporting standards and its impact on BNP Paribas' risk management practices. The bank aligns with these regulations and reinforces risk assessment and monitoring, allowing for early NPL identification and preemptive intervention. BNP Paribas' NPL management strategy demonstrates a successful integration of risk mitigation, early intervention, and proactive communication with distressed borrowers. This approach is in line with the broader trend in major French banking institutions, underscoring the importance of regulatory compliance and risk-aware strategies in the modern banking sector. This report offers valuable insights into the intricate realm of NPL management and its implications for financial stability.