12 June 2019

European Commission: Fourth progress report on the reduction of non-performing loans (NPLs) and further risk reduction in the Banking Union

The European Commission confirms that NPL levels are continuing their downward trajectory towards pre-crisis levels. The ratio of NPLs in EU banks has come down by more than half since 2014, declining to 3.3% in the third quarter of 2018 and down by 1.2 percentage points year-on-year.

Building on the December 2018 Euro Summit conclusions, this report will inform discussions on the completion of the Banking Union at the next meeting of EU finance ministers on 14 June, not least on the steps that need to be taken towards a European Deposit Insurance Scheme (EDIS).

Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union said: "Working out the remaining stocks of non-performing loans is part of our ongoing efforts to make the banking sector even stronger. Our banks are now better capitalised and better prepared to withstand economic shocks. We've recently agreed on more robust framework to regulate and supervise banks. Given this progress in reducing risks, I call on EU Finance Ministers to move forward with other measures to complete the Banking Union.”

In a separate Communication on the Deepening of Europe's Economic and Monetary Union released, the Commission invites EU leaders to finalise the changes to the Treaty establishing the European Stability Mechanism and to make a renewed effort to advance towards the completion of the Banking Union. Together with the completion of the Banking Union, this is essential for the development of Economic and Monetary Union, and strengthening the international role of the euro.

Despite clear improvements, high ratios of NPLs do remain a challenge in some Member States and deserve continued attention. This Communication calls on Member States and the European Parliament to accelerate work on the outstanding proposals to complement the EU's action to tackle this issue.

Important strides have already been made towards full implementation of the EU's Action Plan to tackle the high stocks of NPLs. However, the Commission calls on co-legislators to quickly agree on its proposed measures around the benchmarking of national loan enforcement and insolvency frameworks, and to develop a sharper focus on insolvency in the European Semester process.

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