Shearman & Sterling LLP | FinReg | European Banking Authority Reports Reduction in EU Banks’ Non-Performing Loans
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  • European Banking Authority Reports Reduction in EU Banks’ Non-Performing Loans
    The European Banking Authority has published a report on non-performing loans in the EU banking sector, in which it finds that total NPLs have decreased from over €1.5 trillion in June 2015 to €636 billion in June 2019. The level of European NPLs was a key concern for EU supervisors and market participants following the financial crisis, triggering efforts to deal with the issue at a supervisory, political and market participant level. The major contributor to the reduction of NPLs has been the sale or securitization of such loans in the secondary market. A more robust framework has also been put in place at an EU level, including the EBA guidelines on management of non-performing and forborne exposures and the recent amendment to the Capital Requirements Regulation requiring banks to have minimum loss coverage for non-performing exposures.
    The report does find that NPLs are still more concentrated in EU countries such as Greece (which holds 39% of all EU NPLs) and Cyprus, while Sweden holds just 1% of EU NPLs. The report warns that impediments to resolving NPLs remain significant in countries with higher NPL ratios. While ongoing efforts are being made to further reduce NPL levels, weakening economic conditions mean the EBA is advising banks to continue closely monitoring asset quality and to actively manage NPLs off their balance sheets.
    View the EBA's report on Non-Performing Loans.
    View details of the EBA's Guidance on management of non-performing loans.
    View details of the amendments to the CRR.
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