IMF: European banks must solve NPL issue

European banks are in need of prompt and all-encompassing actions in order to resolve the inherited issue of nonperforming loans and insufficient business models which threaten to lower their profits, the International Monetary Fund warned yesterday.

In its latest assessment of global financial stability, the IMF states that low profitability due to low interest rates and low economic growth could undermine the buffers of European banks in time, which would hamper their ability to provide support to economic revival and weaken stability,.

– In the euro area, excessive nonperforming loans and structural drags on profitability require urgent and comprehensive action. Reducing nonperforming loans and addressing capital deficiencies at weak banks is a priority – the report states.

According to the IMF data, nonperforming loans in Europe still amount to around EUR 900 billion.

Despite this, the IMF concludes that the risks to global financial stability have decreased since the previous report, published in April.

As they say, the recovery of petroleum prices has helped certain developing markets, and the fear of China's economic slowdown have been ameliorated by Beijing's incentives meant for supporting economic growth.

Međunarodni monetarni fond-MMF Beograd

International Monetary Fund

IMF

nonperforming loans

NPL