Scope Ratings | A series of debtor-friendly national and regional decrees introduced before the pandemic was already weighing on investor sentiment. But the sharp economic downturn has exacerbated uncertainties that were building up and will depress recovery rates on NPL portfolios even further.
To advance towards banking union it is necessary to reduce systemic risk, and the quality not just the level of capital is ever more important. The most important risks associated with the banking sector remain the ratio of NPLs (non-performing loans) and the exposure to sovereign debt, according to analysts at Morgan Stanley.The European banks have made significant efforts to improve the quality of their assets.
J.L. M. Campuzano (Spanish Banking Association) | Según los datos publicados la semana pasada por el Banco de España la tasa de morosidad cayó en octubre hasta un 6,08%, 1,7 puntos más baja que en diciembre y muy por debajo del 8,41% de hace un año.
J.L.M. Campuzano (Spanish Banking Assocation) | We are echoing the IMF’s recent report on the evolution of the European economy. All of Europe is seeing growth, but this has dynamic has to be supported by structural reforms which boost potential growth and best financing to achieve this.
Toxic, unproductive or problematical, or however you want to call those assets which were the ruin of the Spanish banks, are not easy to get rid of. Assets linked to the property bubble reached over 300 billion euros at the worst point of the crisis, between 2011 and 2012. But thanks to the lenders’ huge efforts, the last official figure from the Bank of Spain stands at 190 billion euros.
Probably the fact they came from Euskadi and were based there is what saved the former Basque cajas (savings banks) from the worst vices which destroyed hundreds of lenders throughout Spain, according to Xabier Sagredo, executive chairman of BBK.
Spanish banks NPLs ratio fell to 8.22% in October, over one percentage point lower than a year earlier. Recently published figures from the Bank of Spain show that the pace of the decline in NPLs accelerated in October, registering an anual 12.52% drop (-11.64% in September).
ACF | The ECB is proposing a tightening up of the provisions required from the European banks to cover loans which are classified as doubtful from January 2018, according to today’s press.
Ecofin agreed last week on a set of actions to be undertaken between now and end-2018 to reduce EU banks’ amounting €921 billion in September 2016 (almost 9% of the euro area’s GDP. At last the EU finance ministers acknowledged that possible “negative cross-border spillovers” from high NPL ratios in some member states require a common EU strategy to address the problem.
The certainty that we are on the threshold of a phase of consistent interest rate rises – the Fed could implement two or three further hikes this year – is spurring the European banks to endow themselves with liquidity from the ECB, at low prices.