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Non-Performing Loans and the European Union Legal Framework

In: The Palgrave Handbook of European Banking Union Law

Author

Listed:
  • Elisabetta Montanaro

    (University of Siena)

Abstract

Economic recovery and a more intrusive supervision have contributed to the progress recently made in reducing the NPL (non-performing loan) legacy in the most affected euro area countries. However, ample differences exist in the adjustment path, explained by country-specific factors and fragilities, and by different constraints arising from the new regulatory framework of bank crisis management. Due to the NPL overhang, many European banks are still in vulnerable conditions, although formally compliant with capital requirements. The single supervisory rulebook has remained unfinished lacking a harmonised supervisory treatment of NPLs. The prudential provisioning backstop proposed by the European Commission in the context of its NPL package is therefore a significant regulatory innovation, aimed at defining a consistent relationship between bank capital and loan loss reserves. However, not enough attention has be paid to what really ought to be the main purpose in dealing with the NPL legacy, that is, maximising the number and the amount of problem loans returned to the performing status.

Suggested Citation

  • Elisabetta Montanaro, 2019. "Non-Performing Loans and the European Union Legal Framework," Springer Books, in: Mario P. Chiti & Vittorio Santoro (ed.), The Palgrave Handbook of European Banking Union Law, chapter 10, pages 213-246, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-13475-4_10
    DOI: 10.1007/978-3-030-13475-4_10
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