In this thesis research we attempted to identify the factors affecting the level of Non-Performing Loans (NPLs) of the European banking systems for the 6-year period of 2011-2016, during recession in Europe. Essentially, we wanted to provide insights and evidence on the effects of the major financial crisis to European banks’ credit risk. In our analysis, we used balanced panel data of 140 banks from 26 European Union Countries, applying the Fixed Effects Model and using both bank-specific and macro-specific factors to determine the total level of NPLs. We used, ROE and ROA ratios, Capital Adequacy ratio (CAR), Total Liabilities to Total Assets (TLTA) indicator and the logarithm of Total Assets (Bank Size), as bank-specific variables, and GDP growth rate, Inflation rate, Unemployment rate and Interest as macroeconomic variables. The results indicated that the main cause of high levels of NPLs has a bank-specific nature, as ROA, CAR and TLTA ratios appeared to have a significant and negative relationship with the level of “problem loans”, along with the factor of Bank Size, which appeared to have an important positive relationship
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