International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online)

Early Warning Indicators for Monitoring Non Performing Loans in Jordanian Banking System
Usama Adnan Fendi, Ihab Hanna S. Sawalha, Jamal Shamieh, Osama Omar Jaara

Abstract
This study aims at: 1) Exploring the macro and micro level variables that predict the loan quality deterioration in banking system at early time span, 2) To support more proactive corrective actions from the regulatory authority toward the problem financial institutions; 3) provide a guidance for establishing differential premium system for deposit insurance corporation based on the risk level for member banks; and 4) enhance the current supervisory authority's framework to control the banking system and insure the stability of the economy.This research used panel data analysis for a sample taken from 20 banks operating in Jordan for the years 2006-2014. This paper uses well-determined macroeconomic and microeconomic indicators that have been applied by different researches, several bank regulators, and deposit insurers, to estimate its relation with the level of nonperforming loans. The results found that there significant relationships between the selected indicators and the level of nonperforming loans ratio.

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