THE IMPACT OF NON-PERFORMING LOANS ON FINANCIAL PERFORMANCE IN A SAMPLE OF IRAQI COMMERCIAL BANKS – (THE BANK OF BAGHDAD IS A MODEL)
The process of granting loans from banks is considered as the trust they give to their customers, but this trust should not be a basic foundation when granting loans, even if these loans are granted according to sound banking principles, which entail risks that the bank may be exposed to due to the customer’s refusal to fulfill his financial obligations to the bank. Perhaps due to the unexpected economic conditions that affect customers, which puts them in a state of default, which weakens the ability of banks to provide loans, which is considered one of the most important sources of achieving returns and profits for banks. Therefore, the problem of non-performing loans is considered one of the main problems facing most banks, which hinders their work. Among the reasons that led to the exacerbation of the problem of banking default is the lack of soundness and study of credit decisions in the event of granting loans, errors in the economic feasibility study, failure to adhere to the procedures and controls of credit policies within the bank, in addition to the embezzlement and theft to which the bank is exposed, and the inefficiency of banking management. To avoid this problem, it is necessary to Study it carefully, using scientific methods with regard to credit decisions and guarantees, which differ according to the type of loan. In the case of long-term loans, their risks are high, as the problem lies in the Bank of Baghdad, which is the largest Iraqi bank here, with the high volume of non-performing loans in it and its incurring large losses due to bad loans, which affected This negatively affects its profits and reserves, and the bank deducts a portion of its profits to meet unrecovered debts allocated to doubtful debts despite the decrease in its capital. This is due to the Bank of Baghdad’s failure to adhere to the instructions of the Central Bank of Iraq, especially with regard to the adequacy of capital and the guidelines for credit classification, which reflects the inefficiency of the bank’s management. In addressing the problem of defaulting loans.
Non-Performing Loans, Financial Performance