Past Event

Is there a way out of non-performing loans in Europe?

At this event we looked at the issue of non-performing loans in Europe. The event also saw the launch of the latest issue of "European Economy – Banks, Regulation and the Real Sector."

Date: July 6, 2017, 12:30 pm Topic: European Macroeconomics & Governance

Video and audio recording


SUMMARY

The European and national regulatory authorities are concerned about the repercussions of the growing impaired assets and their consequences on financial stability in the near future. On the 6th of July, Bruegel, together with European Economy – Banks Regulation and the Real Sector and SWP-Berlin held an event on non-performing loans. This event presented the issue of European Economy – Banks, Regulation and the Real Sector (issue 2017.1) on the main exit strategies from non-performing loans on the table, with a particular focus on the set up of a state-backed Asset Management Companies (AMCs). The roadmap consists of enhanced supervision and reforms in the restructuring, insolvency and debt recovery frameworks as to increase recovery value from NPLs and reduce the length of work-out procedures. In the short-term, restructuring banks with high levels of impaired assets and developing secondary markets were defined as priorities.

While there is a large stock of NPLs to resolve, it is also important to stop the stocks from growing – for some countries, the current default rate is higher than the cure rate and the underlying factors have been pointed out as low growth, high unemployment, lack of disposable income or high interest rate margins. On the resolution side, the issues of asset composition – non-tradable assets may not present a lemons problem but a “patience problem”- and pricing were deemed of key importance. As it was discussed, real economic value is not defined if there is no market. The formation of secondary markets, on the other hand, has been hindered by asymmetries in legal regimes, governance or state-aid rules.

Despite the fact that the NPLs are concentrated in few countries, the possibility of spill-overs makes the case for the set-up of a European AMC, a project filled with open questions – the mutualisation of risks or even the decision of which banks should be allowed to transfer assets to AMC outside of the state-aid envelope illustrate what boils down to be a political willingness issue.

Event notes by  Inês Goncalves Raposo

 

Event Materials

Presentation by Giorgio Barba Navaretti and Giacomo Calzolari

Presentation by Maria Demertzis

Presentation by Aimilios Avgouleas

Schedule

Jul 06, 2017

12:30-13:00

Check-in and lunch

13:00-13:10

Opening

Giorgio Barba Navaretti, Professor of Economics University of Milan and chief Editor European Economy - Banks, Regulation and the Real Sector

Maria Demertzis, Deputy Director

13:10-13:20

Introduction

Giacomo Calzolari, Professor of Economics, University of Bologna, and Editor of European Economy-Bank Regulation and the Real Sector

13:20-14:20

Panel discussion

Chair: Maria Demertzis, Deputy Director

Emilios Avgouleas, Chair in International Banking Law and Finance. University of Edinburgh

Martin Hellwig, Director, Max Planck Institute for Research on Collective Goods

Helen Louri, Head of the Department of Economics, Athens University of Economics and Business

Laura von Daniels, Associate, German Institute for International and Security Affairs (SWP)

14:20-15:00

Discussion with the audience

15:00

End

Speakers

Emilios Avgouleas

Chair in International Banking Law and Finance. University of Edinburgh

Giorgio Barba Navaretti

Professor of Economics University of Milan and chief Editor European Economy - Banks, Regulation and the Real Sector

Giacomo Calzolari

Professor of Economics, University of Bologna, and Editor of European Economy-Bank Regulation and the Real Sector

Maria Demertzis

Deputy Director

Martin Hellwig

Director, Max Planck Institute for Research on Collective Goods

Helen Louri

Head of the Department of Economics, Athens University of Economics and Business

Laura von Daniels

Associate, German Institute for International and Security Affairs (SWP)

Location & Contact

Bruegel, Rue de la Charité 33, 1210 Brussels

Matilda Sevon

matilda.sevon@bruegel.org

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