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Restructuring in Central Europe
CE countries and non-performing loans
Many non-performing loans (NPLs) remain on the banks’ balance sheets, tying up capital that could otherwise fund economic growth. Our Restructuring Central Europe report asks: what next?
Central Europe NPLs in November 2014
Debt sales in Central Europe are increasing. As its economy improves, the region is attracting more distressed debt investors. For the banks, portfolio transactions offer an effective and speedy remedy for their NPLs.
These NPLs are tying up capital for new lending. In so doing, they’re holding back economic growth. Portfolio and asset disposals could be a solution.
However, banks do have another option. They may decide to keep their troubled loans, manage them in-house, and then benefit when full economic recovery arrives.
While national supervisors want an end to the NPL problem, the regulatory environment is still uncertain. As a result, banks find it difficult to define their strategic direction.
- The market for loan portfolio sales is huge – there’s €60 billion of NPLs in the nine countries that make up Central Europe (Poland, Czech Republic, Slovakia, Hungary, Romania, Slovenia, Croatia, Bulgaria and Serbia).
- Despite improvements in real GDP across the region, NPL ratios and volumes haven’t improved – in fact they’ve worsened, though deterioration is decelerating.
- The exceptions are Poland, Czech Republic and Slovakia, where NPL ratios and volumes in have been relatively stable in the last three years.