The ongoing recession will result in a fresh surge in non-performing loans (NPLs) once payment holidays and moratoria end later this year. NPL investors played a valuable role in tackling the stock of problem loans from the last crisis, but in the aftermath of the current recession more complex financial restructuring will be needed. Governments should facilitate the refinancing of distressed but viable companies, possibly through a special regime for SMEs.
The banking system is critical to society and requires attention and support. In doing so, however, tough love is preferable to complacency.
Eleven years since the start of Europe’s financial crisis, and the legacy of non-performing loans in the EU, though much smaller, is still a live issue for some member states.
With the end of the Greece support programme, authorities now have scope to focus on the legacy of NPLs and excess private-sector debt. Two wide-ranging schemes are under discussion. They should be assessed in terms of required state support, likely investor appetite for problematic bank assets, and institutional capacity to manage a complex new organisation tasked with debt restructuring.
The resolution of non-performing loans (NPLs), a stock of roughly €870 billion in the EU banking industry, is central to the recovery of Europe’s banking sector and the restructuring of the excess debt owed by private sector borrowers. Could the development of distressed debt markets be a new element of capital market deepening in Europe?
The monitoring and analysis of capital movements is essential for policymakers, given that capital flows can have welfare implications. This report, commissioned by the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union, aims to analyse capital movements in the European Union in a global context.
The new year could very well see the positive story of 2017 continue in Europe – but a number of looming policy and political problems cannot be ignored.
The introduction in 2018 of forward-looking provisioning for credit losses in EU banks delivers on a key objective in the post-crisis regulatory agenda. This was intended to dampen future lending cycles. For now, banks will be sheltered from the impact on regulatory capital requirements, as the implications for financial stability are far from clear. In any case, the new standards should encourage the disposal of banks’ distressed assets, underpinning the ongoing agenda on NPLs.
At this event we looked at the issue of non-performing loans in Europe. The event also saw the launch of the latest issue of "European Economy – Banks, Regulation and the Real Sector."
Years after the start of the financial crisis, non-performing loans and private debt remain obstacles to the recovery of bank credit and investment.
Italian banks are back in the spotlight. After MPS failed to raise enough capital from private investors earlier this year, Banco Popolare di Vicenza (BPVI) and Veneto Banca take centre stage. The story of these two banks epitomises the strategy of delayed reform that has been so characteristic of the Italian banking crisis.
Separating ‘legacy assets’ from banks’ core business is central to the rehabilitation of Europe’s banking system. How can Europe progress in its ongoing effort to rid the financial system of legacy assets, and equip it with renewed growth?