Shearman & Sterling LLP | Financial Regulatory Developments Focus | European Commission Reports Steady Downward Trend in EU Banks' Non-performing Loans
Financial Regulatory Developments Focus
  • European Commission Reports Steady Downward Trend in EU Banks' Non-performing Loans
    The European Commission has published a Communication to the European Parliament, the Council of the European Union and the European Central Bank, setting out its first progress report on the implementation of the "Action Plan To Tackle Non-Performing Loans in Europe" that was adopted by the Council in July 2017. The Communication discusses addressing NPLs as part of risk reduction in the financial sector and reports that the general improvement in NPL ratios over recent years continued in 2017. The ratio of NPLs is at its lowest level since Q4 2014. The Communication concludes by stressing the importance of maintaining the pace of NPL reduction and the need, not only for continued action by individual banks and by Member States, but also for concerted action at EU level by the Commission and other EU institutions, including the ECB.

    A Commission Staff Working Document, published jointly with the Communication, provides further detail on the workstreams identified as necessary to deliver the Action Plan and on developments in selected Member States.

    The Commission expects to issue its next progress report by March 2018. It also plans to publish, in Spring 2018, a package of policy measures, including legislative proposals, to deliver those parts of the Action Plan for which it has direct responsibility. The package will include measures for: establishing a blueprint for national Asset Management Companies in the event of a bank failure under the EU Bank Recovery & Resolution Directive; developing secondary markets for NPLs; enhancing the protection of secured creditors; introducing statutory prudential backstops to prevent the risk of under-provisioning of NPLs; and improvements to data availability and comparability as regards NPLs.

    View the Commission Communication.

    View the Commission Staff Working Document.