How can we connect the different initiatives for NPL resolution and identify an agenda that is shared between EU, national authorities and the private sector.
Given a number of initiatives within the ECB, at EU and national level, NPL resolution has moved centre stage in the European policy discussions. Bank restructuring in key euro area countries in the context of the new resolution directive will need to rely on market-based solutions to distressed debt to a much greater extent.
The objective of the event is to connect the different initiatives in the banking, legal and restructuring fields, and to identify an agenda that is shared between EU, national authorities and the private sector.
This event is only open to a small number of slected invitees and Bruegel Members. The held under Chatham House rule.
The speech of Vítor Constâncio will be on the record and livestreamed on this page starting at 13.45.
9.00 – 9.30
9.30 – 11.15
Session 1: Deleveraging amidst low bank profitability: experiences and agendas
Guntram B. Wolff, Director
11.15 – 11.30
Opening keynote address:
Thomas Wieser, Chair of Economic and Financial Committee and Eurogroup Working Group
11.30 – 12.45
Session 2: NPL resolution in the banking union: new momentum?
Sharon Donnery, Deputy Governor, Central Bank of Ireland and Chair of the SSM NPL Task Force
12.45 – 13.45
13.45 – 14.15
Keynote address: “Resolving Europe’s NPL burden: a foundation for growth”
Vítor Constâncio, Vice President, ECB
14.15 – 15.30
Session 3: Attracting investors into distressed debt and restructuring situations
Julien Wallen, Managing Director, Blackrock
15.30 – 15.45
15.45 – 17.00
Session 4. Bank restructuring: institutional innovations
Corso Bavagnoli, Head of Department for Financing of the Economy, French Treasury
John Berrigan, Deputy Director-General, DG for Financial Stability, Financial Services and Capital Markets Union
Gert-Jan Koopman, Deputy Director General, European Commission, DG COMP
Reza Moghadam, Vice Chairman of Global Capital Markets, Morgan Stanley
Head of Department for Financing of the Economy, French Treasury
Chief Financial Officer, Sareb
Chief Risk Officer, Bank of Cyprus
Deputy Director-General, DG for Financial Stability, Financial Services and Capital Markets Union
Director-General, European Commission, DG ECFIN
Vice President, ECB
Deputy Governor, Central Bank of Ireland and Chair of the SSM NPL Task Force
Adviser to the Prime Minister of Portugal
Head of Financial Stability Directorate, Bank of Italy
Director of Oversight, European Banking Authority
Governor, Bank of Slovenia
Deputy Director General, European Commission, DG COMP
Deputy Chief Risk Officer, Unicredit Group
Vice Chairman of Global Capital Markets, Morgan Stanley
Managing Director, Cerberus
Managing Director, Bank Analytics, Moody’s
Managing Director, Blackrock
Chair of Economic and Financial Committee and Eurogroup Working Group
Distressed asset investors can relieve banks of their NPL overhang and offer valuable restructuring expertise, although banks will need to realise a further valuation loss. Regulators could do a lot to support the growth of this market.
Growth in Spain again exceeded expectations this year, and bank deleveraging appears to have reached an end. Addressing non-performing loans was a precondition for recovery, and it required comprehensive financial sector reform.
The year 2016 has not been good to Italian banks. While resilient to the first wave of financial crisis in 2008, due to their low exposure to US sub-prime products and to the fact that Italy did not have a pre-crisis housing bubble, they have been suffering much from the euro sovereign crisis and the ensuing deteriorating economic conditions.
An important guiding principle in resolving non-performing loans (NPLs) should be to ensure that viable debt remains serviced, while non-viable debt gets resolved. We present here a framework to approach the issue.
The European Central Bank has begun to tackle a key symptom of banking sector fragility with its proposed guidelines on banks’ management of non-performing loans (NPLs). But detailed targets for the reduction of NPLs and prescriptions for the internal governance and management of distressed assets also represent a new style of more intrusive supervision. For the ECB to succeed in bank rehabilitation, a macroeconomic scenario should guide the deleveraging process, capacity needs to be built, and governments will need to support a more holistic restructuring effort.
Weakness in the Italian banking sector is a major concern for the euro area. Retail investors stand to lose out if BRRD bail-in rules are strictly applied, and many in Italy are seeking an exception for political reasons. However, Silvia Merler argues that this would set a dangerous precedent. She calls for an orderly bail-in, followed by compensation for investors mis-sold unsuitable products.
The new European banking supervision system is broadly effective and, in line with the claim often made by its leading officials, tough and fair, but there are significant areas for future improvement.
The Blueprint provides a review of the first 18 months of European banking supervision. It reviews the overall situation and the situation in a number of euro-area countries. It provides important insights into the start of a new policy regime that involves profound change for the European banking landscape
Silvia Merler and Marcello Minenna review the structure of of the recently adopted Italian guarantees scheme, and look at solutions implemented in other countries. They argue that rather than spending time revising rules that have already been agreed, alternatives should be considered to make the guarantee schemes as effective as possible.
Italian banks have recently come under market pressure, as investors seemed to have grown worried about the sector. This triggered a speed-up in the discussion between the Italian government and the European Commission about the creation of a “bad-bank”, on which a decision is reportedly due this week.
EU-wide security of savings must be considered in order to take banking union seriously. Banks' holdings of government bonds must be limited.
Vulnerabilities in the Italian banking system are causing fears of a banking crisis to surface.