General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
July 11, 2017

ESRB published a report on resolving non-performing loans (NPLs). The report summarizes the NPL situation in the EU, followed by practical guidance on the process leading to NPL resolution, including a synopsis of the available options. Specific areas of interest include incentives for, and potential impediments to, the resolution of NPLs, policy experiences on asset management companies, and the conditions of secondary markets for distressed assets in the EU.

The report noted that the stock of NPLs in the EU banking sectors amounted to 5.1% of total loans at the end of 2016. The elevated NPL stock creates macro-prudential and financial stability issues. The report contains practical guidance for policymakers on the three steps that must be taken to design the overall response to the NPL issue. In the first step, a clear upfront diagnosis of the size and scope of the NPL problem should be made, followed by an operational separation of NPLs from other performing assets of the bank. In the second step, the NPLs of the concerned banks should be subject to valuation and triage, to identify the viable exposures—to be restructured—and the non-viable exposures, which would be liquidated. Additionally, an assessment of the viability of each individual bank following the resolution of their NPLs needs to be made. In the third and final step, the relevant NPLs should be removed from the banking system, whereby banks may need to be restructured, merged, or sold to facilitate their return to sustainable profitability.


The report outlines the practical aspects of NPL resolution, highlighting that a comprehensive policy response should be developed further to address the key aspects of this issue. Finally, the report offers specific policy proposals for a range of measures. In the medium term, the work should concentrate on structural issues to improve recoveries from NPLs. However, in the short term, the report recommends that micro-prudential authorities should strengthen their efforts to improve NPL management of banks by:

Enforcing compliance with the EU NPL definition and prudent measurement of NPLs

Requesting regular updates of NPL reduction strategies and setting targets for NPL reduction

Extending the adoption of good practices to all banks


Related Link: Report (PDF)

Keywords: Europe, ESRB, EU, NPL, Banking, Report

Related Insights

EBA Finalizes Guidelines on the STS Criteria in Securitization

EBA published the final guidelines that provide a harmonized interpretation of the criteria for a securitization to be eligible as simple, transparent, and standardized (STS) on a cross-sectoral basis throughout EU.

December 12, 2018 WebPage Regulatory News

OSFI Sets Domestic Stability Buffer for D-SIBs at 1.75%

OSFI set the level for the Domestic Stability Buffer at 1.75% of total risk-weighted assets, as calculated under the Capital Adequacy Requirements (CAR) Guideline.

December 12, 2018 WebPage Regulatory News

FSI Publishes Paper on Proportionality in Insurance Solvency Rules

FSI published a paper on proportionality in the application of insurance solvency requirements.

December 11, 2018 WebPage Regulatory News

BCBS Updates Framework for Pillar 3 Disclosure Requirements

BCBS published the updated framework for Pillar 3 disclosure requirements.

December 11, 2018 WebPage Regulatory News

EBA Issues Revised List of Validation Rules for Reporting

EBA revised the list of validation rules in its implementing technical standards on supervisory reporting.

December 11, 2018 WebPage Regulatory News

IMF Reports Assess the Stability of Financial System in Brazil

IMF published a report on the results of the Financial System Stability Assessment (FSSA) on Brazil.

December 11, 2018 WebPage Regulatory News

FED Governor Examines Pros of Imposing Capital Buffers on Large Banks

At the Peterson Institute for International Economics in Washington D.C., the FED Governor Lael Brainard summarized the financial stability outlook, highlighted areas where financial imbalances seem to be building, and touched on the related policy implications.

December 07, 2018 WebPage Regulatory News

US Agencies Propose Rule on Appraisals for Real Estate Transactions

US Agencies (FDIC, FED, and OCC) proposed a rule to increase the threshold level at or below which appraisals would not be required for the residential real estate transactions from USD 250,000 to USD 400,000. Comments will be accepted for 60 days from publication in the Federal Register.

December 07, 2018 WebPage Regulatory News

EBA Single Rulebook Q&A: First Update for December 2018

This week one answer was published as part of the Single Rulebook Questions and Answers (Q&A).

December 07, 2018 WebPage Regulatory News

FED Updates Reporting Form and Instructions for FR Y-14Q

FED published the updated reporting form FR Y-14Q for Capital Assessment and Stress Testing, along with the associated instructions.

December 06, 2018 WebPage Regulatory News
RESULTS 1 - 10 OF 2325