EBRD Report: CESEE Non-Performing Loans Stable Amid Economic Uncertainty

EBRD Report: CESEE Non-Performing Loans Stable Amid Economic Uncertainty

(IN BRIEF) The latest NPL Monitor report by the EBRD reveals that non-performing loans (NPLs) in the CESEE region remained stable despite economic uncertainties. While NPL volumes increased marginally, the overall NPL ratio held steady at 2.1%, indicating resilience in the banking sector. Challenges persist in commercial real estate and SME lending due to reduced demand and high interest rates. The Greek market stood out with robust NPL activity driven by secondary sales. The report, part of the Vienna Initiative, aims to maintain financial stability in emerging Europe.

(PRESS RELEASE) LONDON, 2-Jul-2024— /EuropaWire/ — In the face of ongoing economic uncertainty, non-performing loans (NPLs) in Europe’s central, eastern, and south-eastern regions (CESEE) have shown resilience, according to the latest NPL Monitor released. Published by the European Bank for Reconstruction and Development (EBRD), the report highlights that while NPL volumes in the CESEE region saw a slight uptick to €27.5 billion between December 2022 and December 2023, the overall NPL ratio remained stable at 2.1%.

The report underscores that despite external pressures such as high inflation and geopolitical tensions, the region’s banking sector has maintained control over credit risks. It notes a steady coverage ratio of approximately 65%, indicating effective management of bad debts despite challenges in commercial real estate lending and loans to SMEs due to reduced demand and refinancing risks in a high-interest rate environment.

“While commercial real estate and SME lending face challenges, the stability in NPL ratios and coverage ratios suggests resilience within the CESEE banking sector,” the report states. It cautions, however, against potential risks of deteriorating asset quality in light of persistent economic uncertainties.

The NPL Monitor also highlights subdued transactional flows across the CESEE region in 2023, except for Greece, which saw a buoyant market largely driven by secondary sales. The strategic approach to portfolio sales and industry consolidation among credit servicers contributed to increased secondary market activity.

The report is part of the Vienna Initiative framework, aimed at enhancing financial stability in emerging Europe, and is published alongside the IMF’s Deleveraging and Credit Monitor. Established during the global financial crisis, the Vienna Initiative continues to unite banks, governments, regulators, and international financial institutions in safeguarding the region’s financial resilience.

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