["International Journal of Finance &Economics, Volume 31, Issue 3, Page 4374-4389, July 2026. ", "\nABSTRACT\nThis work explores the determinants of non‐performing loans (NPLs) in Europe, focusing on how macroeconomic and bank‐specific agents augment systemic risk within the financial system. Using a dataset that includes quarterly data on European countries and incorporates major events like the BREXIT vote and the structural debt crisis, this research utilises dynamic panel data analysis to examine these factors. The findings reveal that Government Debt and the structural debt crisis show a strong and positive relation with elevated levels of NPLs. Conversely, the 10‐year bond rate is negatively related to NPLs. Additionally, total bank assets and total bank deposits also show a positive relation with NPLs. These results highlight the crucial role of macroeconomic stability and financial indicators in influencing NPL levels, while the paper points out the importance of effective policy measures to manage NPLs and improve financial stability.\n"]