Press Releases EPP Group: Banks must be able to act on bad loans now

EPP Group: Banks must be able to act on bad loans now

“The Coronavirus health crisis can easily turn into a new banking crisis. We need to prepare therefore for the expected rising number of new problematic bank loans now as these loans will spell trouble for the banks’ balance sheets once the current support measures fade away”, said Markus Ferber MEP, EPP Group Spokesman in the European Parliament’s Economic and Monetary Affairs Committee.

His comments come ahead of the presentation from the European Commission today of an action plan on how to handle these so-called non-performing loans, which will start rising again due to the drastic slowdown in the economy during the Coronavirus pandemic. When these bad loans go up, the ability for the banks to help with the economic recovery goes down.

The new action plan from the European Commission comes at a time when there are still unsolved problems with non-performing loans from the past. An important piece of legislation to create a secondary market for non-performing loans has been blocked for over a year in the Parliament due to resistance from the Greens and the Socialists.

Esther de Lange MEP, Vice-Chairwoman of the EPP Group and co-Rapporteur of the non-performing loans files, said: “Parliament has missed the opportunity to do something with the bad loans when the economy was still growing and with low interest rates. It goes without saying that the situation has become more complicated since then, and that the current crisis requires us to pay even more attention to including sufficient consumer protection in these sensitive files, but the urgency to deal with the matter has done nothing but increased.”

“Minor improvements in transparency and standardisation to make comparisons easier for buyers and sellers of non-performing loans can only do so much in the absence of a legislative framework for secondary markets”, Markus Ferber pointed out.

“I can only call on the Greens and the Socialists to [follow the plea from the Commission to] continue the legislative work on the proposal for a secondary markets framework for non-performing loans and the extrajudicial enforcement procedure”, said Ferber who acknowledged that well-structured special bad banks could also play a role in mitigating the bad loans problem, but that those banks should be set up in accordance with strict rules. “We don’t want to keep ‘zombie banks’ alive or have the taxpayer shoulder all the risk”, he said.

The new action plan and the legislation that is not yet in the European Parliament are vital in preventing another banking crisis, Esther de Lange stressed.

“We want to solve the problem now, and let’s be clear: this is not only about Italy and Italian banks, it is much bigger. We cannot and should not only focus on bad banks. All banks have to be treated in the same way”, de Lange concluded.

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