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Financial News: ECB's Nouy: NPLs To Remain Top Priority For

ECB's Nouy: NPLs To Remain Top Priority For Sometime

03/27/2017 - 07:13:00 (RTTNews)

(RTTNews) - Non-performing loans remain a big issue in some euro area member states and are set to be a top priority for some time to come, Daniele Nouy, Chair of the Supervisory Board of the European Central Bank, said Monday.

That said, Nouy noted that NPLs in the euro area declined by EUR 54 billion to EUR 921 billion between the third and quarters of 2015 and 2016.

Consequently, the ratio of NPLs shrank to 6.5 percent from 7.3 percent, she noted.

"Still, in some Member States, NPLs remain a big issue," Nouy said in introductory remarks at the press conference held on the sidelines of the release of the ECB annual report on supervisory activities.

"They weigh on the profitability of banks and limit their ability to finance the economy."

This month, the ECB issued guidance to banks, asking them to provide a clear strategy for reducing NPLs that includes setting ambitious but realistic targets and putting in place relevant governance and operational structures.

Such guidance will ensure that banks take a consistent and effective approach to reducing NPLs, Nouy said.

She also urged national governments to take steps to resolve the NPL issue such as making judicial systems more efficient and creating fast out-of-court procedures. Individual governments could also increase access to collateral and align fiscal incentives, the official added.

Nouy also asked banks to adapt their business models to become profitable again.

Citing high fragmentation in the banking sector in some countries, Nouy said there was a clear case for consolidation through mergers and acquisitions, so that strong competition and weak profits scenario could be eased.

A banking union would provide banks the benefits of a larger market and customers can choose from a wide range of banks that supervised according to the same higher standards, she added.

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