The stockpile of Nonperforming Loans (NPL) in the European Union has halved since 2015, but, and even though all the progresses, remains hefty at lenders in Greece and Cyprus, according to the latest data released by the bloc’s banking watchdog.

The volume of NPLs across EU banks has fallen from €1.15 trillion in June 2015, when they were 6% of total loans, to €636 billion or 3% by June 2019, according to the European Banking Authority (EBA). It looked at a sample of 150 banks that account for over 80% of the sector’s total assets.

The overall drop was due to regulatory intervention, «political determination» to tackle the problem properly, and the boost from economic growth and low interest rates, EBA said.

While the average level of NPLs for the bloc has halved, some countries remain at a high level as they try to tackle a stubborn legacy of NPL stockpiles.

Greece’s NPL ratio was 39.2% in June this year, with Cyprus at 21.5%. Five other countries were above 5%, Portugal included. In 2015, 10 EU countries reported double digit NPL ratios.

Italy recorded the biggest drop, down €145 billion in over the four years, followed by €81 billion in Spain, €60 billion in Britain, and €43 billion in Germany.

Poor loans now account for nearly 8% of Italian loans, down from nearly 17% in June 2015.

«There are significant ongoing initiatives that aim to further boost the reduction of legacy assets both at European level and in specific countries,» the EBA statement said.

As the economy weakens, banks should closely monitor the quality of assets on their books to actively manage their NPLs, it added. 

Original Story: Reuters | Huw Jones
Photo: FreeImages.com / Jonte Remos
Edition: Prime Yield