EU finance ministers discuss common solution for non-performing loans

It was not lack of ambition that was keeping the European Union determining how to solve the problem of €1,000 billion currently held in non-performing loans (NPLs), but more a question of finding a common solution to fit all member states, Malta’s finance minister said on Friday.

Prof. Edward Scicluna, who was addressing the media with European Commission vice-president Valdis Dombrovskis and European Central Bank vice-president Vitor Constancio at the end of an informal meeting of EU economic and financial affairs ministers in Valletta, said that the Malta Presidency intended to present a full programme for consideration by the end of its mandate at the end of June.

Dombrovskis confirmed that some individual countries had managed to deal with the issue successfully so it was now a question of presenting the issue on an EU level and determining how to adapt the individual successes into a workable common policy.

He said that the ministers had had a timely discussion on deepening economic and monetary ties, in line with the Commission’s White Paper on the Future of Europe.

“Several member states are awaiting guidance from the ECB on dealing with NPLs, although this is primarily the responsibility of individual countries,” Dombrovskis said.

He said that the Commission was working on a blueprint based on the experiences of asset management companies that had provided good solutions in the past, to clarify what each country can do with respect to a clear interpretation of the legislation, which the commission will present.

Constancio said that the ECB, aware that pending NPLs were hindering the profitability of the banking sector, had issued banks a set of best practices guidelines on dealing with the issue on their balance sheets.

“Today’s meeting recognised that before 2007, the number of NPLs was normal across the EU, and countries need to introduce laws on insolvency, enforcement of debt and the execution of collateral,” he said.

Constancio said that if the economic recovery in the EU continues – and if inflation reaches the EU’s goals – the issue of NPLs would be somewhat alleviated as banks would be more at ease to include out part of the loans in their balance sheets.

The ministers discussed the challenges and opportunities faced by the Economic and Monetary Union (EMU), on the basis of the progress made with respect to the Five Presidents’ Report, and the Commission’s White Paper on the Future of Europe.