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Dr Kokkinis talks non-performing loans

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Dr Andreas Kokkinis presented his paper titled: “Asset quality and resolving mechanisms: The implications of banks’ corporate governance on NPL management” and co-authored with Dr Andrea Miglionico from the University of Reading at the Society of Legal Scholars Annual Conference held at the University of Central Lancashire in Preston on 4 September 2019. The paper was presented as part of the Banking Law panel convened by Dr Sandra Booysen from the National University of Singapore and Dr Francesco de Pascalis from Brunel University.

Dr Kokkinis and Dr Miglionico argued that senior management manifests incentives to hide NPLs to avoid negative signalling effects, as a high stock of NPLs is typically perceived as weakness of the financial conditions of a bank. Managers prefer to mask these exposures, although this can exacerbate information asymmetries on asset quality. Such problems have been visible in several cases of European banks that faced financial difficulties in the last few years (e.g. Banca Monte dei Paschi di Siena, Veneto banks, Banco Santander, Piraeus Bank and Alpha Bank). They concluded that bank directors should be held accountable to shareholders and bondholders for the risk identification of NPLs, and that executive remuneration contracts should create financial incentives to disclose and resolve NPLs as early as possible.

The presentation was attended by banking and financial law experts from UK and Singapore Universities and was well-received and followed by interesting discussions. The Banking Law panel also included papers on crypto-currencies and the crypto-economy, prudential regulation, financial institution culture and misconduct, money laundering, whistle-blowing, unauthorised payments, novation in commercial loans, letters of credit and interest rate swap mis-selling.