Three Eurozone Countries Among Top 10 Countries With Highest Bad Debt Ratio

Of the top 10 countries in the world with the highest bank bad debt to gross loans ratio, three are eurozone countries – Cyprus, Greece and Italy. Two of them, Cyprus and Greece, rank within the top five.
San Marino, one of the world’s smallest countries and one of the world’s oldest republics, had the highest bad-loan ratio in the world in 2015 with 46% of total loans classified as non-performing according to data from The World Bank.

San Marino, which uses the euro as its official currency is not a eurozone member. A traditional tax haven for dodgers, the landlocked European country’s financial sector-oriented economy suffered a sharp contraction since the beginning of the global financial crisis partly due to a massive outflow of non-resident deposits.

Ratio of bank NPL to gross loans in 2015, selected countries - LD Investments

San Marino had the highest bank bad debt to total loan ratio in 2015.

Since the 2008 financial crisis, Cyprus, Greece and Italy saw steep increases in bad debt. Currently, the bad debt ratio in all three countries along with Portugal exceed 10% of total loans which is considerably higher than the U.S. where even at the height of the 2008-2009 financial crisis, it was only 5%.
The Monte dei Paschi di Siena, the world’s and Italy’s oldest bank which traces its origins to 1472, is Italy’s most troubled financial institution. An EU-wide stress test of 51 banks conducted by the European Banking Authority (EBA) this year found the Italian bank to be the weakest from the assessment.

Bank non-performing loans to gross loans (%), 2008-2015, selected European countries - LD Investments

Eurozone countries Cyprus and Greece are among the top five countries with the highest bad debt ratio.

Elsewhere around the world, while China has been getting much attention lately for its rising bad loans, India’s bad debt ratio has also been on an uptrend since 2009 and currently stands at 5.8% of total loans, considerably higher than China’s 1.5% figure. India’s bad debt situation is impeding the country’s ability to extend credit; gross bank lending grew by 9.3% in the six months to March this year compared with an average growth rate of 20% between 2010 and 2012.

Bank non-performing loans to gross loans (%) ratio, 2008-2015, selected Asian countries - LD Investments

India has seen a steep increase in the proportion bad debt tot total loans since 2008.

Over in the Americas, Latin America’s largest economy, Brazil, is currently in a recession, having contracted by 3.8% last year, leading to a rise in bad debt at Brazilian banks.

Bank non-performing loans to gross loans (%), 2008-2015, selected North and South American countries - LD Investments

With its economy in recession, Brazil has seen an increase in bad debt.

 

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