Hellenic Open University Conferences, International Conference on Business & Economics of the Hellenic Open University 2017

Font Size: 
ECB's guidance to banks on the management of Non Performing Loans: the challenge of their time – bound reduction. Comparative evaluation of best practices from: Greece, Cyprus, Italy, Ireland, Portugal, Spain, Slovenia and Germany.
ANTA RAMALIOU, SEVASTIANOS MAILLIS, Evangelos Manouvelos

##manager.scheduler.building##: Titania
##manager.scheduler.room##: Platon
Date: 2017-04-22 11:00 AM – 01:00 PM
Last modified: 2017-04-11

Abstract


The high levels of Non – Performing Loans (NPL) in Europe, have a negative impact on bank lending. Banks with high NPL levels face significant difficulties due to balance sheet, profitability and capital constraints. At the same time, without lending, not only the economic development is impossible, but also the NPL levels are further deteriorated, since economic recovery is a prerequisite for NPL resolution.

In this paper, we examine “ECB’s Guidance to banks on non-performing loans”, presenting at the same time the key findings from the “Stocktake Exercise 2016”, a comparative analysis of eight European countries’ national supervisory practices and current legal frameworks. Specifically, the following issues are considered: developing the NPL strategy, implementing the operational plan and embedding the time – bound reduction of NPLs over ambitious time-bound horizons (NPL reduction targets). In addition, we review the appropriate governance structure and operational set-up, in order to supervise and monitor NPL issues such as: early warning, recognition of NPL, forbearance, collateral valuations, recovery measures, legal process and foreclosure.

The key findings of the “Stocktake Exercise 2016” evidence that there are countries which have proactively established appropriate supervisory practices, legal and other measures, in order to manage NPL issues, whereas, for other countries, including Greece, there is still room for improvement, especially in the legal, judicial and extrajudicial framework. Given the three year time – bound target for NPL reduction, it is expected, that Banks will try to accelerate adoption of the aforementioned strategy, in order to avoid taking the risk of low – priced portfolio sales, resulting to losses that will require funding through equity capital increase.


Keywords


ECB's guidance; Non Performing Loans; NPL targets; Comparative evaluation;

Conference registration is required in order to view papers.