non-performing loans is another key cause of the collapse of some of the banks. according to bog, the banking sector assets quality remained a major concern as banks' stock of non-performing loans and non-performing loans ratio remained high. it was observed that most of the collapsed banks had huge non-performing loans on their balance sheets. non-performing loans affects the banks in the following way, amongst others: increase in operating costs, leading to decrease in profitability.this has financial ramifications for banks, which may cause capital reduction leading to undercapitalization.