European Commissioner for Financial Services, Mairead McGuinness, issued a warning at a press seminar on Tuesday 8 December about avoiding the mistakes of the past and thinking ahead about the problem of ‘non-performing loans’ (NPL), whose stock will increase even more sharply as the economic crisis caused by the Covid-19 pandemic continues.
This is why the European Commission will next week present a new strategy on the treatment of NPLs, which should look again at the creation of a secondary market for non-performing loans and set out avenues for convergence between national insolvency and debt recovery frameworks (see EUROPE 12595/2).
“We need a mechanism to remove non-performing loans from banks’ balance sheets so they can continue lending”, McGuinness said.
The Commission document, which is still under internal consultation, could propose the establishment of a European network of national asset management vehicles.
“If Member States decide to set up asset management vehicles (...), we believe that a network could be useful”, the Commissioner said.
She also considered that too rapid a withdrawal of national support measures for banks could further accelerate the NPL problem. The Commissioner was also in favour of maintaining, for the time being, the recommendation to banks not to pay dividends, which could be reviewed in the light of the progress of the pandemic.
All in all, in relation to the financial crisis of 2008, Ms McGuinness was keen to point out that the banks were stronger, European regulation stricter and preparation coming earlier.
New proposal in sight to unlock ‘EDIS’?
The European Commissioner also took stock of ongoing work on the Banking Union, including the creation of a European Deposit Insurance Scheme (EDIS), which has been blocked for years.
In this respect, she indicated that the Commission was considering withdrawing the proposal from the table in order to make a new proposal, which could take the form of a hybrid model, with a European dimension, in order to unblock the negotiations. Discussions are ongoing, the Commission is examining different options and no final decision has yet been taken, the Commissioner said.
The Commission will only withdraw its proposal when it has found something that will receive the necessary support, she did however warn.
On Friday 11 December, the President of the Eurogroup will report on ongoing work on the Banking union at the Euro Summit. (Original version in French by Marion Fontana)