The COVID-19 pandemic has stressed the economy in the Eurozone, but governments and financial institutions could support real economy. In particular, the NPLs – non-performing loans – continued to fall.
This is a positive sign as large stocks of NPLs affect banks by turning into depressing earnings and impair their ability to raise funds in the market.
However, some critical issues persist. The borrowers’ credit worthiness blurred and made it harder for banks to assess and manage credit risks.
The Supervisory priorities and assessment of risks and vulnerabilities outlined the main area of concern. This is regarding identifying and classifying distressed borrowers, collateral valuation, and adequacy of provisioning practices.
The Dear CEO letter initiative already provided ad...
