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ESBG statement: EU Commission NPL action plan

ESBG statement: EU Commission NPL action plan

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​​​​​Association of savings and retail banks warn that short-term-focused forced sales of loans to cleanse balance sheets would undercut long-term customer-bank relationships


>> See: European Commission Action Plan on NPLs


The following statement by ESBG reacts to the European Commission Action Plan on Non-Performing Loans released today. 


BRUSSELS, 15 December 2020 



ESBG appreciates strongly the active approach contained within the Action Plan on Non-Performing Loans (NPLs) published today by the European Commission and the tools it contains to manage NPLs. We see a lot of good ideas within the plan that arrives when Europe’s economy and people struggle. 

Helping Europeans stay resilient since the Covid-19 crisis began, ESBG members have supported their customers in a resolute way on many fronts. Amongst those, an added batch of new loans granted to businesses and households who found themselves short on liquidity. Nevertheless, the ongoing Covid-19 crisis takes a heavy toll on real-economy companies and private households. Some will lose their fight for financial survival, that’s unavoidable. As a consequence, it seems likely that bank balance sheets will take a hit. We are optimistic, however, that NPL levels of ESBG member banks will not rise to unsustainable levels in the savings and retail banking sector.

We do have our doubts, however, about parts of the plan. One questionable element, the proposed development of secondary markets for distressed assets, figures too prominently as an answer  to cleanse financial institution balance sheets. Forced sales of loans gone sour – so-called “fire sales” – fall short as a solution. Suboptimal at best, these fire sales lead to prices plunging far below market level while ceding control over the final debtors to buyers whose only interest focuses on short-term profits, not long-term commercial relationships with borrowers. Going down this path could erode confidence between clients and ESBG member savings and retail banks, whose trust-driven business model has remained intact for families and firms for several generations. 

Some 885 members banks provide €1 trillion in financing to businesses of all shapes and sizes. They work with people from start-up phase to jobs-creating, export-driven maturity. A prudent and long-term risk management approach, with customer proximity as a core pillar of savings’ banks business model, already avoids excessive build-up of NPLs. 

Public and private sector must continue to work together on solutions to mitigate the negative effects of the Covid-19 crisis. We look forward to a further dialogue with EU institutions and would stand ready to share expertise in an advisory panel foreseen to be set up.


For more information, please contact:

- Dirk Smet on +32 473 423589 or at dirk.smet@wsbi-esbg.org; or

- James Pieper on +32 496 51 72 70 or at james.pieper@wsbi-esbg.org.


Note to editors:


About ESBG  The European Savings and Retail Banking Group

ESBG represents the locally focused European banking sector, helping savings and retail banks in 20 European countries strengthen their unique approach that focuses on providing service to local communities and boosting SMEs. An advocate for a proportionate approach to banking rules, ESBG unites at EU level some 885 banks, which together employ 664,000 people driven to innovate at 47,900 outlets. ESBG members have total assets of €5.7 trillion, provide €1 trillion in corporate loans, including to SMEs, and serve 164 million Europeans seeking retail banking services. ESBG members commit to further unleash the promise of sustainable, responsible 21st century banking.










Non-performing Loans; European Institutions; Covid-19