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MACROECONOMIC FACTORS OF CONSUMER LOAN CREDIT RISK: THE CASE OF LITHUANIA³
Greta Keliuotyte-Staniuleniene, Rasa Kanapickiene, Deimante Vasiliauskaite, Renatas Spicas

ABSTRACT: Macroeconomic factors play a crucial role in determining the quality of a bank’s loan portfolio and can significantly impact the level of banking credit risk. Furthermore, the levels of credit risk vary between different loan types, e.g. the level of consumer loan credit risk is higher than other loans. However, the existing research lacks a systematic approach to credit risk factors, particularly in analysing the macroeconomic factors of consumer loan credit risk. Therefore, this study aims to estimate the macroeconomic factors of consumer loan credit risk in the Lithuanian banking system. This study finds that macroeconomic conditions negatively associate with non-performing loans for consumer loans. Economy growth, stock market, foreign exchange market, and institutional environment factors also have a risk-reducing impact. In contrast, credit market and bond market factors have a risk-increasing impact on consumer loan credit risk. The proposed findings of this study can assist financial institutions in managing credit risk more effectively. They may be useful to the government and central bank when implementing fiscal and monetary policies. Furthermore, our research can contribute to filling the existing gap in the literature regarding macroeconomic factors and credit risk analysis of consumer loans in Lithuania.

KEYWORDS:  credit risk; consumer loans; non-performing loans; macroeconomic factors; Lithuania.

JEL classification:  G23

³Acknowledgments:  This research has received funding from the European Regional Development Fund (project No 13.1.1-LMT-K-718-05-0010) under grant agreement with the Research Council of Lithuania (LMTLT). Funded as the European Union’s measure in response to the COVID-19 pandemic.