Non-Performing Loans and Corona (cepPolicyBrief COM(2020) 822)
The ratio of non-performing loans (NPL) is increasing again in the member states of the European Union for the first time in five years. The Centre for European Policy (cep) has examined the problem of so-called bad loans in detail in a cepPolicyBrief with a view to proposals by the EU Commission.
According to the analysis, the share of NPLs rose again for the first time last year to 2.6 per cent after a steady decline since 2016 (4.8 per cent). In 2020, the ratio was 30 per cent in Greece, 15.2 per cent in Cyprus, 5.1 per cent in Italy, 2.2 per cent in France and 1.1 per cent in Germany. "Depending on how the Corona crisis unfolds, credit default risks could grow very quickly. That competitors or taxpayers in other member states should bear the resulting costs should be rejected," says cep CEO Professor Lüder Gerken.
The top economist of the Freiburg think tank rejects the establishment of an EU-wide bad bank for bad loans. "It is appropriate that the EU Commission does not seek an EU-wide bad bank for bad loans. Such a bad bank would carry a considerable redistribution risk in view of the very different starting positions in the member states," says Gerken.
The EU Commission wants to oblige banks to disclose certain "essential data" on new NPLs in a standardised procedure. In addition, the Commission is in favour of a European platform ("data hub") for NPL data. "There may actually be benefits associated with this European networking," says cep CEO Gerken. "State aid rules and resolution rules for banks must not be de facto suspended, because that would allow state-owned bad banks to reduce their stocks of bad loans with taxpayers' money."