Determinants of the nonperforming loans level movement in the banking sector of Serbia

This paper offers an analysis of the regulatory and economic variables in the banking sector which may impact, to a greater or lesser extent, the level of nonperforming loans in Serbia. Although the banking sector, contrary to the rest of the economy, is recording positive results, there is also a simultaneously present and growing trend of nonperforming loans which is threatening to endanger the entire stability of the financial system. To that end, in the statistical and econometric analysis the point of departure were the following determinants: capital adequacy, the amount of loan loss provisions, profitability, ownership structure, and concentration in the banking sector, but also the growth rate of the real GDP. Using defined variables, what was examined was the stationary position of the observed series of data by means of an Augmented Dickey-Fuller (ADF) test of unit root, for the period from the last quarter of 2008 and up to the third quarter of 2013. According to the methodology of the National Bank of Serbia, quarterly data were used with the total of 20 observations. The main data sources were different statistical reports published by the National Bank of Serbia.