Banking Solutions for Non-Performing Loans: Legal Challenges and Strategic Approaches in Modern Financial Systems

Abstract

This article examines the complexities of managing non-performing loans (NPLs) in modern financial systems, focusing on the legal challenges and strategic approaches employed by banks to mitigate these risks. Non-performing loans have become a significant concern for financial institutions worldwide, as they impact profitability, liquidity, and overall financial stability. The study explores various legal frameworks and regulations that govern NPL management, highlighting their effectiveness and limitations in different jurisdictions. It also delves into the strategic approaches adopted by banks, such as loan restructuring, asset sales, and the use of specialized asset management companies, to address NPL issues. The findings suggest that while legal frameworks provide a necessary foundation for managing NPLs, banks must also develop robust internal strategies to effectively reduce their NPL ratios and enhance their financial resilience. Additionally, the article discusses the importance of a proactive risk management culture and the need for continuous adaptation to evolving regulatory environments. By integrating legal and strategic perspectives, this study offers a comprehensive overview of the current landscape of NPL management, providing valuable insights for policymakers, financial institutions, and stakeholders involved in the banking sector.