AFP, Frankfurt :
Eurozone banks have made progress since the financial crisis, but must do more to put their houses in order during economic good times, European Central Bank (ECB) watchdogs said Wednesday.
“Certain banks must do more. In particular, they must clean up their balance sheets,” chief ECB supervisor Daniele Nouy told reporters in Frankfurt.
Top of the watchdogs’ list is a 760-billion-euro ($940 billion) mass of bad loans that was still weighing on banks’ balance sheets in the third quarter of 2017, a figure that had fallen by 200 billion over two years.
So-called non-performing loans (NPLs) — on which borrowers have failed to keep up with repayments-“drag down profits, they divert resources that could be put to more productive use, and they keep banks from financing the real economy,” Nouy said.
“Banks should use the good times to reduce NPLs… once a downturn sets in, it will become much harder,” she added.
For its part, the ECB will lay out more clearly how it expects banks to set aside cash to cover the risks of future bad loans in an update to its guidance.
With the banking sector more robust, plans to establish a eurozone-wide deposit insurance scheme known as EDIS could advance “a step further”, Nouy continued.
Eurozone banks have made progress since the financial crisis, but must do more to put their houses in order during economic good times, European Central Bank (ECB) watchdogs said Wednesday.
“Certain banks must do more. In particular, they must clean up their balance sheets,” chief ECB supervisor Daniele Nouy told reporters in Frankfurt.
Top of the watchdogs’ list is a 760-billion-euro ($940 billion) mass of bad loans that was still weighing on banks’ balance sheets in the third quarter of 2017, a figure that had fallen by 200 billion over two years.
So-called non-performing loans (NPLs) — on which borrowers have failed to keep up with repayments-“drag down profits, they divert resources that could be put to more productive use, and they keep banks from financing the real economy,” Nouy said.
“Banks should use the good times to reduce NPLs… once a downturn sets in, it will become much harder,” she added.
For its part, the ECB will lay out more clearly how it expects banks to set aside cash to cover the risks of future bad loans in an update to its guidance.
With the banking sector more robust, plans to establish a eurozone-wide deposit insurance scheme known as EDIS could advance “a step further”, Nouy continued.
