Abstract
This chapter presents the first of the main issues that are still undermining euro area banking system soundness, that is, the large amount of non-performing loans on banks’ balance sheet. For a number of European banks, the main focus of the restructuring work has been on cleaning up their balance sheets by selling off or winding down large non-performing loan portfolios. This chapter provides insights into changing regulations and introduces the role of the European Central Bank in the field of non-performing loans management by banks. A comparison of the European Council Action Plan on non-performing loans presented by the European Commission with the last addendum of the European Central Bank on the same topic is provided.
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- 1.
It is important to highlight that, in parallel with the supervisory framework discussed in this book, IFRS 9 represented a significant accounting innovation affecting the banking industry. Indeed, even if not directly imposed by the banking regulators, this accounting standard is one of the G20 commitments agreed on directly after the financial crisis to promote a safer and more stable financial system (Sironi 2018).
- 2.
The sample covers all commercial, savings and cooperative banks in the euro area on Orbis Bank. Banks that did not report data on non-performing loans in 2017 have been excluded from the analysis. The sample period started in 2013 due to the scarcity of data available before that year.
References
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Arnaboldi, F. (2019). The Main Challenges Facing the Euro Area Banking System. In: Risk and Regulation in Euro Area Banks. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-23429-4_2
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DOI: https://doi.org/10.1007/978-3-030-23429-4_2
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