Credit Risk Management and Financial Performance of Commercial Banks in the UK
This paper examines the relationship between credit risk management and financial performance of UK commercial banks. The non-performing loan ratio is used as an indicator of credit risk and the return on total assets is used as a measure of financial performance. The hypothesis discusses the impact...
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| Format: | Dissertation (University of Nottingham only) |
| Language: | English |
| Published: |
2022
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| Online Access: | https://eprints.nottingham.ac.uk/70922/ |
| _version_ | 1848800637214523392 |
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| author | Zhou, Hui |
| author_facet | Zhou, Hui |
| author_sort | Zhou, Hui |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | This paper examines the relationship between credit risk management and financial performance of UK commercial banks. The non-performing loan ratio is used as an indicator of credit risk and the return on total assets is used as a measure of financial performance. The hypothesis discusses the impact of non-performing loan ratio and capital adequacy ratio on the financial performance of commercial banks and the mediator effect of asset adequacy ratio respectively. The sample is selected from 54 commercial banks in the UK, the unbalanced panel data is selected from 2005 to 2021, and the fixed effects regression model is constructed for the analysis. The results are that non-performing loan ratio has a significant negative effect on financial performance. Capital adequacy ratio has a significant positive effect on financial performance. What’s more, capital adequacy ratio is a suppressing effect, not a mediator effect in how the non-performing loan ratio affects financial performance.
This article provides recommendations for the management of credit risk in UK commercial banks from the perspective of stakeholders in the commercial banks themselves, the government, the banking regulators and the British Banking Association. As a result, the risk management of commercial banks is of key importance to the improvement of financial performance, and the capital adequacy ratio has a significant supervisory effect on the risk management of banks. |
| first_indexed | 2025-11-14T20:54:43Z |
| format | Dissertation (University of Nottingham only) |
| id | nottingham-70922 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T20:54:43Z |
| publishDate | 2022 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-709222023-07-07T11:29:33Z https://eprints.nottingham.ac.uk/70922/ Credit Risk Management and Financial Performance of Commercial Banks in the UK Zhou, Hui This paper examines the relationship between credit risk management and financial performance of UK commercial banks. The non-performing loan ratio is used as an indicator of credit risk and the return on total assets is used as a measure of financial performance. The hypothesis discusses the impact of non-performing loan ratio and capital adequacy ratio on the financial performance of commercial banks and the mediator effect of asset adequacy ratio respectively. The sample is selected from 54 commercial banks in the UK, the unbalanced panel data is selected from 2005 to 2021, and the fixed effects regression model is constructed for the analysis. The results are that non-performing loan ratio has a significant negative effect on financial performance. Capital adequacy ratio has a significant positive effect on financial performance. What’s more, capital adequacy ratio is a suppressing effect, not a mediator effect in how the non-performing loan ratio affects financial performance. This article provides recommendations for the management of credit risk in UK commercial banks from the perspective of stakeholders in the commercial banks themselves, the government, the banking regulators and the British Banking Association. As a result, the risk management of commercial banks is of key importance to the improvement of financial performance, and the capital adequacy ratio has a significant supervisory effect on the risk management of banks. 2022-09-08 Dissertation (University of Nottingham only) NonPeerReviewed application/pdf en https://eprints.nottingham.ac.uk/70922/1/20256037_BUSI4019UNUK_2021_2022.pdf Zhou, Hui (2022) Credit Risk Management and Financial Performance of Commercial Banks in the UK. [Dissertation (University of Nottingham only)] |
| spellingShingle | Zhou, Hui Credit Risk Management and Financial Performance of Commercial Banks in the UK |
| title | Credit Risk Management and Financial Performance of Commercial Banks in the UK |
| title_full | Credit Risk Management and Financial Performance of Commercial Banks in the UK |
| title_fullStr | Credit Risk Management and Financial Performance of Commercial Banks in the UK |
| title_full_unstemmed | Credit Risk Management and Financial Performance of Commercial Banks in the UK |
| title_short | Credit Risk Management and Financial Performance of Commercial Banks in the UK |
| title_sort | credit risk management and financial performance of commercial banks in the uk |
| url | https://eprints.nottingham.ac.uk/70922/ |