12 December 2011

EMF Study on Non-Performing Loans in the EU

This Study is an update of the “Methodological Note and Survey on Non-Performing Loans” that the EMF published in 2010, which presented statistical data on the evolution of Non-Performing Loans (NPL) up to Q3 2009. This Study describes major trends in NPL up to end-2010 or Q2 2011 (depending on data availability) in the following countries: Belgium, Denmark, France, Germany, Hungary, Ireland, Italy, Poland, Portugal, Spain, Sweden and the United Kingdom. It should also be pointed out that definitions of NPL indicators are quite different across Member States, and therefore national data which is presented in this Study should not be directly compared on a cross-country basis.

The rise in NPL indicators which were observed between Q3 2008 and Q4 2010 were mainly the result of the rise in unemployment rates and the deterioration of the macro-economic environment which undermined borrowers’ ability to repay their mortgages. However, during 2010 the expansionary monetary policy action undertaken by the ECB and other Central Banks after Q3 2008 led mortgage interest rates to record lows, thus largely offsetting the negative impact of the economic and financial crisis.

Banks and lenders have generally tightened their lending criteria and lowered their Loan-to-Value ratios (LTVs), which has contributed to enhancing the quality of their mortgage loans, and also continued to put in place forbearance programmes.

Most importantly, once put in a long-term context, levels in arrears, doubtful loans and repossessions after end-2009 were still lower than those which were recorded in most EU countries during the previous housing recession in many EU markets (early 1990s). This is largely explained by the different macro-economic scenario which characterised the previous recession: higher mortgage interest rates (in accordance with a much more restrictive interest rate environment across the EU at the time), higher unemployment rates, and no monetary policy reaction, since Central Banks could not lower their policy interest rates in a time of high inflation.

Full study

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