EU banks make progress on risk reduction

EPA-EFE/STEPHANIE LECOCQ

Valdis Dombrovskis, vice president of the European commission for the Euro and Social Dialogue gives a press conference on the progress in risk reduction in the Banking Union and on the Capital Markets Union at the European Commission in Brussels, November 28, 2018.

EU banks make progress on risk reduction


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European Union banks have cut bad loans and raised provisions, according to the European Commission, who published a report of next week’s Eurogroup and ECOFIN meetings where the introduction of the European Deposit Insurance Scheme (EDIS) will be discussed.

The EU executive also assessed the banking sectors’ most threatening problem – the number of non-performing loans (NPLs) of each bank, a legacy by the European economic crisis of the last decade.

“Working out the high stocks of non-performing loans is part of efforts to reduce risks in the European banking sector,” Commission Vice President for the Euro Valdis Dombrovskis said on November 28.

As for the EDIS tool and the meeting on the week to come, Dombrovskis added, “On the basis of the progress achieved on the risk-reduction side, I invite EU Finance Ministers and leaders to agree on concrete risk-sharing measures in December”.

NPLs down 3.4% across EU

The European Commission said in the report published that the ratio of bad loans in all EU banks fell to 3.4%. The drop was of 4.6% a year earlier in the second quarter of the year.

The amount stands at €820 billion in absolute terms, but still not uniform among the bloc’s members. Greece’s 44.9% of all loans are NPLs, in Cyprus 28.1%, in Portugal 11.7%, and in Italy 10.0%.

Capital Markets Union to broaden access to finance

Along with the NPLs’ ratio falling close to pre-crisis levels, the European Commission also helps deal with economic shocks and crises, by building a capital markets union (CMU), which would make it easier for investors, companies and individuals to borrow and invest across the EU.

“The Capital Markets Union is about broadening access to finance for small and medium-size companies, and to increase investment opportunities in Europe,” said the European Commission Vice-President Jyrki Katainen.

“This is why we count on the support of the European Parliament and the Council to agree swiftly on the outstanding measures we proposed under the Banking Union and Capital Markets Union agenda,” Katainen added, reiterating that the strengthening of banks ia one of the EU executive’s main goals.

By establishing a new regulatory framework and institutional set-up to effectively address financial risks in the Banking Union, the bloc aims to better the EU’s banks state of health, part of the ongoing work of strengthening financial stability.

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