📄 Abstract
Once a loan has migrated into non-performing status, the choice of resolution mechanism — direct write-off, bilateral restructuring, transfer to a centralized asset management company (AMC), or securitization through NPL-backed notes — is a first-order determinant of the ultimate recovery value realized by the banking system and of the speed with which balance-sheet capacity for new lending is restored. This study compares the recovery performance of these four resolution channels using a cross-country panel of post-crisis NPL resolution episodes and estimates a recovery-rate regression controlling for legal-system efficiency, collateral type, vintage of the impaired exposure, and macroeconomic conditions prevailing during workout. The results show that securitization structures that tranche NPL portfolios by expected recovery profile achieve the highest average recovery rates, followed by AMC transfer and bilateral restructuring, with direct write-off yielding the lowest recovery as expected given its use as a mechanism of last resort for the most severely impaired exposures. Recovery rates are found to depend significantly on judicial foreclosure efficiency, collateral liquidity, and the time elapsed since default, with recoveries deteriorating sharply once impaired exposures remain unresolved beyond three years. The findings offer a structured empirical basis for sequencing NPL resolution strategy in emerging banking systems seeking to optimize asset-quality cleanup while minimizing fiscal and reputational cost.
🏷️ Keywords
📚 How to Cite:
Djamalov Gofir Oribjanovich , OPTIMIZING NON-PERFORMING LOAN RESOLUTION MECHANISMS THROUGH EFFICIENT ASSET SECURITIZATION AND RESTRUCTURING , Volume 14 , Issue 8, August 2026, International Journal of Asian Economic Light (JAEL) , Pages: 33 - 37 , DOI: https://doi.org/10.36713/epra28925