Lawmakers and governments of the European Union (EU) have reached an agreement on the implementation of new measures to tackle non-performing loans (NPLs).

The political agreement between the European Parliament and the Council of the European Union is expected to reduce risks in the banking sector.

New rules over non-performing loans

The new measures will enable the banks to maintain additional buffer funds to manage the risks associated with loans that may become non-performing.

The measures are expected to reduce non-performing assets on banks’ balance sheets and bolster their performance in long run.

The rules form a part of a set of actions proposed by the European Commission in March this year to address NPLs.

European Commission vice-president for financial stability, financial services and capital markets union Valdis Dombrovskis said: “We have been working intensely over the past years to reduce risks and strengthen the resilience of the European banking sector.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

“Today’s agreement will ensure that banks will have fewer NPLs on their balance sheets, which should increase their solidity and allow them to finance our businesses.

“I am counting on the European Parliament and the Council to swiftly agree on the outstanding proposals on the development of secondary markets for NPLs and facilitating debt recovery.”

According to the new rules, banks will have nine years to build a complete buffer against non-performing loans secured by immovable guarantees, while loans against movable collateral require complete provision within seven years.

The new rules will become effective following the approval of the EU parliament and its member states.

Currently, EU-based lenders hold €731bn ($832bn) of debt that they turn into non-performing assets Reuters reported quoting the European Banking Authority’s latest data.