According to Friday’s data released by the EU Commission and the European Central Bank (ECB), the non-performing loans quotas in Europe are falling steadily in relation to all the loans granted, but their performance in Greece is alarming.
In Greece, the NPL rate has fallen within 12 months from 47.2 percent to 46.9 percent, but it is by far the highest performance in the eurozone, meaning that almost half of the EU’s NPLs belong to Greek banks.
“If almost half of all loans granted are NPL in a country, i. e. are no longer being serviced, then the country’s financial system is not able to survive,” financial analysts claim. “It can only be supported by EU funds – and this level exists in Greece 10 years after the financial crisis.”
EU Commission Vice-President Vladis Dombrovskis tried to calm fears that the NPL quota in Greece is an ongoing threat to the eurozone. He explained that the deep, ongoing financial crisis in the country could not but reflect the state of NPLs.
Dombrovskis said Greece is in recovery and pretty soon the NPL rate will recover. He added that one reason for the high rate is the fact that the reform package in Greece was implemented late, on account of protracted negotiations between Athens and its lenders for both the second and the third bailout reviews.
In spring, the Commission will propose a comprehensive package of measures to reduce the level of existing NPLs and to prevent the build-up of such bad loans in the future.
The package will focus on four areas: supervisory actions; reform of restructuring; insolvency and debt recovery frameworks; development of secondary markets for distressed assets; and fostering restructuring of the banking system.
The banking system is still susceptible to external financial dangers, the Bank of Greece (BoG) also warned in a review of the financial sector released this week.