The Executive Vice-President of the European Commission, Valdis Dombrovskis, warned, on Friday 25 September, of the impact that an incomplete European regulatory framework for the management of non-performing loans (NPLs) would have on the banking sector’s ability to cope with the difficulties associated with the economic crisis caused by the Covid-19 pandemic.
“If we fail to act in time, we could see consequences of the last financial crisis repeating themselves and NPLs would rise on banks’ balance sheets for years afterwards”, said the Financial Services Commissioner at the launch of the NPL Roundtable.
According to Dombrovskis, the strategy for reducing non-performing bank loans should focus less on reducing risks than on supporting economic recovery.
The Executive Vice-President of the Commission urged the European Parliament to adopt its position on the legislative proposal to facilitate the creation of a secondary market for NPL loans. MEPs were unable to do so before the European elections in May 2019, further delaying the start of inter-institutional negotiations (see EUROPE 12226/7).
“This should be a top priority”, Mr Dombrovskis said.
He also called for progress on the convergence of national insolvency and debt recovery frameworks.
According to ECB data, the average ratio of non-performing bank loans increased in the first quarter of 2020 compared with the previous quarter, from 2.6% to 2.9%. (Original version in French by Mathieu Bion)