BEST PRACTICES FOR EFFECTIVELY MANAGING NON …

BEST PRACTICES FOR EFFECTIVELY MANAGING NON-PERFORMING LOANS2 EFFICIENTLY MANAGING NON-PERFORMING LOANSINTRODUCTIONNon-performing loans (NPLs) have increased significantly across Europe since 2008, mainly due to poor supervision and governance, aggressive lending and acquisition strategies, loose credit underwriting policies, high exposure to sectors that were most impacted by the financial crisis (such as real estate) and lax credit controls. The situation has worsened with the prolonged economic downturn pushing highly leveraged borrowers into financial difficulties and leading to a large number of defaults. Increased regulatory requirements for NPL management (including the European Central Bank (ECB) Asset Quality Reviews, harmonisation of NPL classification and disclosures, and the introduction of specific NPL codes and directives) have also contributed to the increase in the overall NPL pool in Europe.

Authority for a sample of more than 60 banks over the period 2010–13. Outliers have been excluded, based on extreme values for lending growth, NPLs and interest margins. 0.2 Interest Income to Gross Loans (relative to average [6.0]) Lending Growth (y/y) (relative to average [-1.2]) Banks with low NPLs -- high NPLS Banks with low NPLs -- high ...

Loading..

Tags:

  Outliers

Information