Non-performing loans in european banks. Management and Resolution

This book analyses non-performing loan (NPL) issues in European banks. Large NPL stock is a primary challenge to European banks and to the European Union (EU) as a whole, given that high NPL levels have several implications for banks, which can be transmitted to the real economy. The objective of this book is to examine the origins of NPLs in the EU, as well as their implications for banks, outline the EU measures and actions undertaken to address NPLs, and discuss the different solutions to handle NPLs, namely NPL management and resolution strategies. To this end, the first section provides an overview on the NPL issues in the EU context, outlining the origins of the problem, its implications for banks and the problem's magnitude. The second section focusses on the EU institutions' approaches to NPLs, by discussing all the initiatives and measures that have been undertaken by the EU authorities in response to the NPL problem. The third section examines EU banks' main tools to address NPLs, highlighting their key features and implications in terms of advantages and limits, as well as the interventions by EU authorities and EU member states in ensuring favourable conditions for banks to dispose of NPLs. The fourth section provides an overview of and discusses the NPL management and resolution strategies adopted by a sample of EU significant banks. The final section provides a concluding discussion of the study emphasising how, in addition to the burden on a bank's profitability and capital, the management of high NPL stock diverts management attention and other resources away from a bank's main activities. At the same time, it points out the need for further efforts to reduce high NPL stock on banks' balance sheets, in order to enable EU banks to re-focus on their core business, lending to the economy.