Credit risk in European Commercial Banks before, during and after the global financial crisis of 2008

This paper examinates the relation of loan loss reserves and credit risk by using bank’s specific data from European commercial banks for the period 2005 till 2013. The analysis is done on 85 commercial banks from 12 different European countries for the periods before, during and after the global financial recession. By using panel data regression technique for all the above-mentioned years, the purpose is to present to what extend the European commercial banks were able to withstand and absorb shocks in the periods before, during and after the recent global financial recession. Further to the examination of the bank specific determinants of loan loss reserves, the paper also provides a comparison between the countries most affected by the recession and the Northwest European countries which were less affected by the global financial recession. The results shows that many bank specific variables significantly influence credit risk and demonstrate consistent results. Declines in capital, in combination with increases in net interest margin levels and impaired loans levels, can be early signs of future problem loans.