Tackling non-performance loans in Europe

The issue of non-performing loans (NPLs) in Europe continues to be a focal point of attention for the banking system, both at national and European level. This article explores the origins and causes of the accumulation of NPLs in Europe and explains why they have been and continue to be an important challenge that needs to be tackled. The reduction of NPLs in the EU banking sector is in fact encouraging and substantial progress is being made. Nevertheless, NPLs remain a significant challenge to the profitability and viability of EU banks, and economic growth at large. Attention also needs to be drawn to the clear and important EU dimension to reducing NPLs, as well as preventing their renewed build-up in the future, given the interconnectedness of the banking system of the EU and particularly of the euro area. In this respect, there is a clear connection with the "Action Plan to Tackle Non-Performing Loans In Europe", which was endorsed by finance ministers in the ECOFIN Council in July 2017. The contribution also touches upon the link with the wider agenda of advancing risk reduction and risk sharing in the EU. Most importantly, the contribution elaborates upon the actions that the European Commission has taken to address NPLs, what their main objectives are and how they could affect the EU banking sector.